Pakistan seeks external financing avenues: FM

July 19, 2024 (MLN): Pakistan will focus on meeting its external financing needs by speaking with foreign governments and lenders to draw foreign investment as well as seeking loan rollovers, the country's finance minister told Reuters on Friday, as his government prepares to execute its new $7 billion International Monetary Fund agreement.

Pakistan and the IMF reached an agreement for the 37-month loan program this month.

Tough measures such as raising tax on agricultural incomes and lifting electricity prices have prompted concerns about poor and middle class Pakistanis grappling with rising inflation and the prospect of higher taxes.

Pakistan has relied heavily on IMF programs for years, at times nearing the brink of sovereign default and having to turn to countries such as the United Arab Emirates and Saudi Arabia to provide it with financing to meet external financing targets set by the IMF.

Finance Minister Muhammad Aurangzeb said in an interview that external financing continued to be an important component, though the government was seeking to focus on more sustainable forms such as direct investment and climate financing.

"I think in the existing situation we can expect those (loan) rollovers to continue to take place ... we have requested extension of maturities," Aurangzeb said.

Rollovers or disbursements on loans from Pakistan's long-time allies Saudi Arabia, the United Arab Emirates and China, in addition to financing from the IMF, have helped Pakistan meet its external financing needs in the past.

The IMF said the new Extended Fund Facility program is subject to approval from its Executive Board and obtaining "timely confirmation of necessary financing assurances from Pakistan's development and bilateral partners".

Aurangzeb said that meeting the external financing gap was "very manageable and very doable".

He said Pakistan plans to expand its strategy beyond relying heavily on rollovers and toward foreign direct investment, including in the huge copper and gold Reko Diq mine in southern Pakistan.

He added his government was working on identifying "bankable and investable" projects for Saudi Arabia and the United Arab Emirates, which have announced interest in billions of dollars in investment in Pakistan.

"That is what's going to lead to sustainability, " he said. "If we can't get this executed in the next three years, we will not be able to get out of the 'last' program."

Pakistan has been plagued by boom-and-bust cycles for decades, leading to more than 20 IMF bailouts since 1958.

It is currently the IMF's fifth-largest debtor, owing $6.28 billion as of July 11 according to IMF data.

Aurangzeb said the Reko Diq copper and gold mine project had drawn interest from the World Bank's private investment arm, the International Finance Corporation(IFC), which had signalled it would invest a "large amount".

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