IMF questions Pakistan’s ability to repay cash as aid team arrives in Islamabad | World News

ISLAMABAD, Media reports on Saturday said the IMF said Pakistan faces major debt servicing challenges and expressed serious doubts about the cash-strapped country’s ability to repay global financial institutions. .

The Washington-based bank’s assessment of Pakistan’s economy came as an IMF-backed team arrived in the country on Friday to meet with country officials after Islamabad requested a new bailout package under the Extended Fund Facility. Announced.

“Pakistan’s ability to repay the fund is at significant risk and remains highly dependent on policy implementation and timely external financing,” Geo News said in a staff report on Pakistan published earlier this month. quoted a Washington-based financier as saying.

“Due to very high risks, especially due to slow implementation of reforms, high public debt and gross financing needs, low gross reserves and net foreign exchange derivatives position of the State Bank of Pakistan, low capital inflows, and socio-political factors, etc. , the implementation of policies could be compromised and repayments could be delayed, “productive capacity and debt sustainability,” the report said.

He further said that restoring external viability is critical to ensuring Pakistan’s ability to repay the fund and depends on the implementation of strong policies, including but not limited to external asset accumulation and exchange rate flexibility. .

It added that although uncertainty surrounding global financial conditions has decreased slightly since the last review, geopolitical instability remains a further source of risk.

Global financial institutions point out that Pakistan needs total financing worth $123 billion over the next five years, with Pakistan expected to seek $21 billion in 2024-25 and $23 billion in 2025-26. It added.

The report further said the crisis-hit country is expected to seek $22 billion in 2026-27, $29 billion in 2027-28 and $28 billion in 2028-29.

A support team from a global financial institution will discuss the first phase of the next long-term financing program with the country’s financial team, sources said.

The advance team has arrived in Pakistan for negotiations, and the IMF mission is expected to arrive on May 16, sources said.

The team will receive data from various departments and discuss the next budget for fiscal year 2025 with Treasury officials.

Officials also revealed that the team will be in Pakistan for more than 10 days.

Pakistan is seeking further relief under the EEF in the range of $6 billion to $8 billion over three years, with the possibility of enhancement through climate finance.

“Accelerating reforms now is more important than the size of the program, which will be determined based on the reform package and balance of payments needs,” the IMF said in an earlier statement.

Meanwhile, Pakistan is set to roll out around $12 billion in debt from key allies such as China in the 2024-25 fiscal year to fill an external funding gap worth $23 billion as the federal government aims to meet budget targets. Decided to ask for an over. before the scheduled arrival of the IMF team.

Treasury insiders said $5 billion would be rolled over from Saudi Arabia, $3 billion from the UAE and $4 billion from China, adding that next fiscal year would also include estimates for further new loans from China. . budget.

Pakistan is set to receive more than $1 billion from the IMF under the new loan program, with new loans from the World Bank and Asian Development Bank also included in the estimated budget.

According to a Ministry of Finance official, the government plans to enter into an agreement with financial institutions for a new financing system. According to the report, the federal government aims to meet the budget target before the IMF mission is scheduled to arrive in Pakistan.

Negotiations for a new financing program with global financial institutions are expected to begin in mid-May ahead of the budget presented in June.

Pakistan narrowly avoided default last summer and the economy has stabilized since the completion of the last IMF program, with inflation falling from a record high of 38% last May to about 17% in April.

The country still faces a large fiscal shortfall, and although the external balance of payments deficit has been contained through import control mechanisms, this has come at the cost of sluggish growth, with growth of around 2% this year compared to last year’s negative growth. It is expected that it will be %. Year.

This article was generated from an automated news agency feed without modifications to the text.