FY23 external financing needs seen at $30.75 billion

ISLAMABAD: The International Monetary Fund (IMF) has estimated Pakistan’s external financing needs at $30.75 billion, equivalent to 8.4 percent of GDP, during the current fiscal year 2022-23.

The IMF staff report, released after the approval of the Extended Fund Facility (EFF) programme, said Pakistan’s requirements would go up over the medium term from the current fiscal year 2022-23 to 2026-27 whereby they would be increased up to $39.2 billion till 2026-27. The financing needs will be standing at $36.6 billion in 2023-24, $35.717 billion in 2024-25, $38.459 billion in 2025-26, and $39.2 billion in 2026-27.

The Fund’s staff report states that the programme remains fully financed as financing commitments from bilateral and multilateral partners will help cover public gross external financing needs in FY2023 and until the newly proposed end of the programme in June 2023.

The IMF staff encourages all key bilateral creditors to maintain their exposure to Pakistan in line with program commitments, it adds.

“Nonetheless, financing risks remain exceptionally high arising from large public sector external rollover needs, the still sizable current account deficit, difficult external environment for Eurobond issuance given recent downgrades and high spreads, and limited reserve buffers to help cover the financing needs in case of delays in scheduled inflows,” the Fund staff warned.

Firm commitments of full programme financing are in place for the next 12 months, it added.

The projections on external financing needs made by the IMF showed that the current account deficit (CAD) is projected at $9.2 billion or 2.5 percent of GDP for the current fiscal year. The amortisation on outstanding repayment of loans has been projected at $20.490 billion in the current fiscal year out of which public sector requirement stood at $15.414 billion and the private sector $5.007 billion in the current fiscal year.

The IMF shows that the available financing has been estimated at $33.334 billion for the current fiscal year but there are some risks attached to the timely receivable of committed disbursements of all dollar inflows.

The foreign direct investment might fetch $2.166 billion in the current fiscal year. The IMF has estimated that the disbursement of loans from multilateral, bilateral creditors, commercial loans, rollover, and bonds could fetch $31.007 billion during the current fiscal year. Out of $31 billion, half of the loan disbursement to the tune of $16.6 billion was projected from the private sector loans. These loans worth $16.6 billion from the private sector will be provided to both the private and public sectors in the range of $6.73 billion and $9.8 billion respectively.

Pakistan will obtain $14.392 billion from official creditors other than the IMF in the current fiscal year, out of which the project loans would fetch $1.819 billion as project loans, China’s $48 million, and programme loans of $7.715 billion in this fiscal year. Out of total programme loans of $7.7 billion, the World Bank will provide $1.05 billion and Asian Development Bank (ADB) $2.2 billion.

Pakistan will seek rollover of loans worth $12,832 billion out of which the public sector rollover from friendly countries would be standing at $9.54 billion and private sector $3.287 billion. Other net dollar inflows are projected to be at $161 million.

The remaining financing needs stand at $2.577 billion, but the IMF is going to provide over $3.828 billion as after augmentation of Extended Fund Facility, Islamabad would get additional $966 million.

The IMF has projected that the gross official reserves position would touch $16.2 billion till the end of June 2023.