The International Monetary Fund (IMF) has urged all key bilateral creditors to maintain their exposure to Pakistan in line with Extended Fund Facility (EFF) program commitments, observing that there has been a rebalancing between creditors in recent months.
IMF in its report “Second, third, fourth, and fifth reviews under the EFF and request for rephasing of access”, released on Thursday, noted that the program remains fully financed.
Financing commitments from bi- and multilateral partners and the temporary suspension of debt service to official bilateral creditors granted under the G20 DSSI initiative will cover gross external financing needs amounting to $27 billion (9.9 percent of GDP) over the next twelve months. Good prospects remain for the remainder of the program. While, on aggregate, key bilateral creditors have maintained their exposure to Pakistan, there has been a rebalancing between creditors in recent months. In this regard, staff encourages all key bilateral creditors to maintain their exposure to Pakistan in line with program commitments, it added.
The Fund has estimated gross external financing needs for Pakistan at $27.013 billion for 2020-21, $23.643 billion for 2021-22 and $28.016 billion for 2022-23.
Pakistani authorities have informed the Fund that they have secured adequate long-term financing from its international partners to support the economic reform program. The current projections suggest that with the policies outlined in the Memoranda of Economic and Financial Policies (MEFPs), the gross external financing needs for the next 12 months (April 2021-March 2022) will amount to $25 billion, of which about $17 billion is amortizations to multilateral and bilateral official and commercial creditors.
“To close this gap, we have secured financing commitments from bilateral and multilateral partners: China $10.8 billion, UAE $2 billion, the World Bank $2.8 billion, the Asian Development Bank $1.1 billion and the Islamic Development Bank $1 billion”, the authorities have added.
“Crucially, key bilateral creditors have maintained their exposure to Pakistan in line with program financing commitments. In addition, we have benefited from the temporary suspension of debt service to official bilateral creditors provided under the G20 DSSI initiative, which covered $2.5 billion falling due over May 2020-June 2021 (of which $0.8 billion related to the second round of DSSI covering January-June 2021 debt service)”, the Pakistani authorities added.
The report noted that China has maintained its exposure by renewing (and augmenting) the CYN 30 billion (about $4.6 billion) three-year bilateral currency swap (about $3 billion at the time of EFF approval), as well as by renewing the maturing commercial loans as part of the program financing assurance commitment.
China has also provided an additional $1bn deposit in July 2020, raising the State Administration of Foreign Exchange (SAFE) deposits to $4 billion. The G20 Debt Service Suspension Initiative (DSSI) amounting to about $2.5 billion (0.9 percent of the fiscal year 2021 GDP) has helped reduce gross financing needs in the near term.