July 20, 2022 (MLN): The International Monetary Fund (IMF) is looking to assess Saudi Arabia’s commitment to financing Pakistan before the multilateral lender disburses fresh funds to the South Asian nation, Bloomberg reported today.
The Washington-based lender wants to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan. The transfer could include special drawing rights, Bloomberg report said, quotingpeople who asked not to be identified discussing private deliberations.
Earlier on Wednesday, speaking at a press conference, Minister Miftah Ismail said Pakistan will obtain financial aid from World Bank as well as $8 billion from some friendly countries as soon as the deal with the IMF is finalized.
One friendly country would provide oil financing worth $1.2 billion, while another country plans to invest $1 billion in the stock exchange, he added.
Given the current economic situation in Pakistan, $1.2 billion loan facility from IMF would be insufficient for Shehbaz Sharif-led government to avoid a debt default.
Moreover, due to financing woes and renewed political uncertainty, Pakistan’s rupee and bonds are sinking.
To note, PKR nosedived by Rs2.99 on Wednesday and settled at Rs224.92 per USD compared to Rs221.99 per USD yesterday.
The Fund is in discussion with a country about the potential transfer of 2bn SDR ($2.6bn), Pakistan’s Finance Minister Miftah Ismail said at a July 20 briefing without naming it.
Pakistan needs at least $41bn in the next 12 months to fund debt repayments and boost foreign exchange reserves, which analysts anticipate will be met but only barely, the report said.
To recall, Pakistan secured a staff-level agreement with the IMF last week to revive its bailout package.
If there’s a risk of default, the IMF’s board may not approve release of the cash.
