Economic crisis: Cash-strapped Pakistan in talks with China, Saudi Arabia to secure $11 bn
Cash-strapped Pakistan is seeking around USD 11 billion from China and Saudi Arabia as part of efforts to fill external and domestic resource gaps so that the IMF bailout programme remains on track to ensure economic stability until an elected government is formed in the country, according to a media report on Friday. This move comes amid the caretaker Government’s push for expanding the tax net effectively to retail, agricultural, and real estate sectors while continuing a crackdown on illegal currency movements.
The Dawn newspaper reported that this information was part of a detailed policy statement issued by caretaker Finance Minister Shamshad Akhtar before the Senate Standing Committee on Finance and Revenue, presided over by Senator Saleem Mandviwalla in Islamabad on Thursday. She said the government was currently working on an economic revival plan that would be presented to the caretaker Prime Minister Anwar ul Haq Kakar soon and shared with the Senate Standing Committee on Finance.
She said the caretaker government had a limited scope to undertake deep-rooted structural reforms but promised to deliver on reforms that were part of the International Monetary Fund (IMF) programme to ensure the disbursement of a USD 700 million loan installment. Talks with the IMF would begin by the end of October on this. The IMF reached a staff-level agreement with Pakistan on a nine-month Stand-by Arrangement (SBA) of about USD 3 billion in June.
The Finance Minister said it was the government’s priority to deliver on the IMF programme to ensure economic stability and continuity. On the external financing gap, Akhtar said the country’s financing needs were still higher, but with the joint efforts of all stakeholders, the government would be able to secure disbursements from the project pipeline and also revive some policy-based financing from multilateral.
External flows would improve with the USD 700 million flows from the IMF. For net bilateral financing of USD 11 billion, China and Saudi Arabia had been requested along with a request for a Saudi oil facility, she said. “To meet the external financing requirements, we are working to secure concessional funding from multilateral (the World Bank, Asian Development Bank, Islamic Development Bank) of USD 6.3 billion,” she said in her written statement, adding that the IMF had already approved USD 3 billion and bilateral assistance of around USD 10 billion was also expected.
At the same time, Akhtar warned that a “key risk to external stability comes from the rise in international commodity prices”, as Brent crude oil prices jumped to USD 95 per barrel in September, an increase of 27 percent from USD 74 per barrel in June. The public debt rose sharply over the last two years, mainly because of devaluations and interest rate hikes. She deplored that even the debt relief from G20 countries for the poor nations had also been consumed without ensuring high-return investments, the paper said.
She said the authorities were also working on amending laws to bring retail, agriculture and real estate into an effective tax net because no government could ever control twin deficits without doing this. Akhtar said the caretaker government was seeking support from courts to get the pending cases resolved to generate an additional Rs.3 trillion. The Election Commission of Pakistan (ECP) recently announced it would hold the election in the last week of January after finalizing the setting up of electoral districts in light of the data of the census, which was held earlier this year.
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