IMF seeks financing guarantee


Pakistan must guarantee that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF financing, the fund’s permanent representative said on Monday.

The International Monetary Fund has been in talks with Islamabad since early last month and is examining its ninth review, which, if approved by the board, would provide $1.1 billion of an agreed $6.5 billion in aid in 2019.

This assistance will expire at the end of this financial year, which ends on June 30. Finance Minister Ishaq Dar had said last week that securing external financing was not one of the conditions for clearing the IMF’s financing.

“All IMF program reviews require robust and reliable assurances that sufficient funding is available to ensure that the balance of payments of the borrowing member is fully financed for the remainder of the program,” the fund’s Esther Perez Ruiz told Reuters in an email. answer the questions.

“Pakistan is no exception.” Pakistan has complied with almost all the measures except the external financing requirement, officials said.

Pakistan’s international bonds rose on Monday – in line with other smaller, riskier emerging markets. Pakistan’s 2026 bond added 1.2 cents to trade at just over 44 cents to the dollar, Tradeweb data showed. Some analysts are optimistic about Pakistan’s near future.

“After completing a long ‘to-do’ list to restore the IMF program, we are confident that Pakistan’s EFF (Extended Fund Facility) program will resume,” said Anna Friedemann at Deutsche Bank in London. However, he said restructuring was “almost certain” at some point.

The rupee, which has weakened due to delays in financing deals with the IMF, also rose in interbank trade on Monday, extending a recovery from Thursday’s 6% slide against the dollar. “The exchange rate has moved significantly in recent days, narrowing the informal currency market premium and bringing rates closer to what they were on January 26,” the IMF’s Luis said in an email.

“This must be the result of the unrestricted operation of the exchange rate market.” On January 25, foreign exchange companies lifted the ban on the currency, saying it created “artificial” distortions for an economy in need of IMF help.

Ruiz pointed out that the exchange rate difference between the open and informal markets has been very detrimental to Pakistan, resulting in a shortage of foreign exchange and consequently imported goods.

He also said that the Pakistani authorities are planning a regular power surcharge from consumers to cover the debt of the power sector. “Energy sector CD [circular debt] FY23 inflows are expected to exceed expectations for the EFF-backed program by a significant margin, with significantly less accruals from delays in fixed rate adjustments, reductions in recovery rates and unbudgeted subsidies,” he said.

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