Pak­istan govt to ar­range up to $3bn stop­gap fi­nanc­ing

Gulf Times Business - - BUSINESS -

In the wake of in­creas­ing scarcity of dol­lar-de­nom­i­nated in­jec­tions from in­ter­na­tional donors, the PTI-led govern­ment would have to ar­range $2bn-$3bn of stop­gap fi­nanc­ing from friendly coun­tries in the com­ing weeks, to avert a deep­en­ing of the eco­nomic cri­sis be­fore an IMF bailout is ap­proved.

Top of­fi­cials of eco­nomic min­istries said that project fi­nanc­ing from in­ter­na­tional donors had shrunk dur­ing the cur­rent fis­cal year, be­cause the pro­ce­dural re­quire­ments for ob­tain­ing ap­provals from com­pe­tent fo­rums could not be ful­filled dur­ing the re­cent po­lit­i­cal tran­si­tion.

Pro­gramme loan flows from mul­ti­lat­eral cred­i­tors, in­clud­ing the World Bank and Asian De­vel­op­ment Bank, had al­ready halted due to the wors­en­ing macroe­co­nomic sit­u­a­tion.

“These mul­ti­ply­ing fac­tors could lead to­wards a se­vere eco­nomic cri­sis,” said a se­nior of­fi­cial, on con­di­tion of anonymity. The IMF pack­age ap­proval process would re­quire at least six-toeight weeks, if ev­ery­thing goes smoothly, at a time when the for­eign re­serves are de­plet­ing at an ac­cel­er­ated pace.

“We need dol­lar in­jec­tions of $2bn-$3bn, and pro­pos­als are un­der con­sid­er­a­tion to man­age fi­nanc­ing from friendly coun­tries, in­clud­ing China and Saudi Ara­bia,” a top of­fi­cial said.

The IMF ne­go­ti­at­ing mis­sion is ex­pected to ar­rive Is­lam­abad next week. It would take at least 7-to-10 days to fi­nalise its re­port. The IMF staff would need a fur­ther 4-to-6 weeks to cir­cu­late the re­port to mem­bers of Ex­ec­u­tive Board of the IMF.

“We can­not get ap­proval from the IMF be­fore end-Novem­ber or early De­cem­ber, so we des­per­ately need to ar­range stop­gap fi­nanc­ing to avert a full-blown cri­sis on the ex­change rate front,” an of­fi­cial said.

The Res­i­dent Rep­re­sen­ta­tive of the IMF in Pak­istan, Teresa Da­ban Sanchez, said the re­cent IMF staff visit made a lot of progress, mostly in macroe­co­nomic ar­eas that would be use­ful for the forth­com­ing bailout dis­cus­sions. “It would help the IMF team to ex­pe­dite things as much as pos­si­ble,” she said.

Sanchez said ad­di­tional tech­ni­cal and pol­icy level talks were needed to ar­rive at com­pre­hen­sive and medium-term pro­gramme lev­els which cover macroe­co­nomic and struc­tural is­sues. The newly-ap­pointed govern­ment spokesman on the econ­omy, Farukh Saleem, said no big cri­sis was faced by Pak­istan’s econ­omy, as it was just a mat­ter of ar­rang­ing $8bn of in­flows.

Af­ter the IMF pack­age was ap­proved, the con­fi­dence of fi­nan­cial mar­kets would be re­stored, as hap­pened in the cases of Jor­dan and Ar­gentina.

In a con­nected de­vel­op­ment, Pak­istan’s project fi­nanc­ing from mul­ti­lat­eral and bi­lat­eral donors se­verely dried down dur­ing the on­go­ing fis­cal year be­cause the Plan­ning Com­mis­sion’s Cen­tral De­vel­op­ment Work­ing Party (CDWP) could not meet for the last five months to ap­prove donor-funded projects.

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