In a significant development, the International Monetary Fund (IMF) has revised down Pakistan’s foreign loan requirements to USD 25 billion for the ongoing fiscal year, providing a relief of USD 3.4 billion for its cash-starved economy, as reported on Saturday. The Washington-based global lender also adjusted the economic growth projection to 2%, rejecting the government’s forecasts.
Following two weeks of talks that concluded on November 15, the IMF announced a staff-level agreement, allowing the release of USD 700 million in the second tranche of an agreed USD 3 billion loan.
Compared to July estimates, the IMF lowered the foreign loan requirements for the fiscal year from USD 28.4 billion to USD 25 billion. The government has already borrowed USD 6 billion in four months, with expectations of USD 12.5 billion in rollovers. The remaining needs amount to about USD 6.5 billion, aside from securing timely debt rollovers.
However, the government faces challenges, as available financing has been reduced by USD 3.7 billion due to difficulties in obtaining loans through Eurobonds and foreign commercial banks.
The IMF disagreed with Pakistan’s projections, revising the current account deficit to USD 5.7 billion from the projected USD 4 billion to USD 4.5 billion. The lender also lowered economic growth projections to 2%, aligning with the World Bank and Asian Development Bank’s forecasts.
Importantly, the IMF cut the inflation rate forecast from 25.9% to 22.8%, potentially allowing for a reduction in interest rates in January’s monetary policy announcement. The IMF did not accept the finance ministry’s projections for various factors, including current account deficit, imports, economic growth, inflation, and gross financing requirements.
These revisions were made during the first review talks of the USD 3 billion bailout package, indicating adjustments to macroeconomic projections and gross external financing requirements. The IMF’s successful negotiation of a date for general elections contributed to the agreement, although it reportedly ignored some critical areas that had previously led to the failure of a USD 6.5 billion bailout package.
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