SBP upbeat on meeting external financing needs

KARACHI: The State Bank of Pakistan on Monday said the country was in a comfortable position to meet its external financing requirements as odds of winning back the IMF bailout were brighter than before.

The gross financing needs for the fourth quarter of this fiscal year and the FY2023 is met comfortably, the SBP said in an analyst presentation post monetary policy meeting. The SBP estimates available financing for the last quarter of FY2022 and the next fiscal year is $51.4 billion, while the financing requirement stands at $44.9 billion.

The acting governor SBP’s Murtaza Syed told analysts that he expected a comforting statement at the end of the current talks with the IMF, if the talks progressed positively.

He said both sides were discussing approaches to end energy subsidies. “The gross financing requirements in this and the next fiscal year are fully arranged as long as Pakistan remains in the IMF programme,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.

“The IMF is capable of negotiating the review with the care-taker government, if needed, as long as all major political parties provide assurance they will honour the arrangement between IMF and the care-taker setup. Precedents regarding this have occurred in countries like Tunisia, Jordan and Portugal,” Rauf added.

The SBP, in its monetary policy statement said the narrowing of the current account deficit together with continued IMF support will ensure Pakistan’s external financing needs during FY23 are more than fully met, with an almost equal share coming from rollovers by bilateral official creditors, new lending from multilateral creditors, and a combination of bond issuance, FDI and portfolio inflows. “As a result, excessive pressure on the rupee should attenuate and SBP’s forex reserves should resume their previous upward trajectory during the course of the next fiscal year,” it added.

The SBP’s statement and projections provide some relief to the financial markets as the fast-declining foreign exchange reserves in the absence of external financing are growing concerns about the country’s ability to meet its external obligations.

The foreign currency reserves of the central bank declined to $10.2 billion during the week ending May 13 —enough to cover less than two months of imports. The falling reserves amid lack of quick foreign assistance and the prevailing uncertainty about the IMF programme threatens to spiral into a full-blown crisis.