Cash-strapped Pakistan has provided the IMF with a financing plan for external payments, in which it has informed the global lender that it will arrange US$8 billion for the purpose instead of $6 billion, according to a media report on Saturday.
The Pakistan government and the International Monetary Fund (IMF) reached a long-awaited staff-level agreement on June 29 to inject a $3 billion Standby Arrangement (SBA) into the ailing economy after months-long negotiations that pushed the country to the brink of default.
The Executive Board of the IMF will meet on July 12 to review the SBA for Pakistan.
According to sources in the finance ministry, the IMF had asked Pakistan for assurances of $6 billion for external payments, The Express Tribune newspaper reported.
However, the sources added that Pakistan had given the IMF assurances of $8 billion for external payments.
The sources said China would provide $3.5 billion to Pakistan of which Islamabad would keep $2 billion in deposits, while the commercial banks of Beijing would provide the country with $1.5 billion.
Besides, Saudi Arabia and the UAE will provide $2 billion and $1 billion to Pakistan, respectively.
Pakistan will also receive $500 million from the World Bank in addition to the Asian Infrastructure Investment Bank’s $250 million.
The finance ministry officials said the $350 million pledged during the Geneva Conference would also come to Pakistan.
Record high target
The government has set a target to raise a record-high debt-financing of Rs 11.10 trillion from domestic commercial and Shariah-compliant banks in the first three months of the current fiscal year.
The funds will primarily be used to pay off maturing old debt and partially finance the large fiscal deficit.
This marks the third consecutive month that the government has set record-high domestic borrowing targets, indicating its heavy reliance on debt to finance budgeted expenditures.
However, this approach raises concerns as the debt has reached unsustainable levels, both domestically and externally, and calls for restructuring.
To address the situation, the government needs to either reduce non-development expenditures, including cutting parliamentary budgets and curbing excessive spending or increase revenue collection.
The provisional revenue collection for the previous fiscal year stood at Rs 7.14 trillion, falling short of the set target of Rs 7.64 trillion.
After debt repayments, the largest expenditure for the government is the interest payment on the overall debt. This leaves little room for the government to carry out development projects and generate job opportunities.
According to the Bank of America Securities, Pakistan is facing an acute liquidity crisis in debt management, which directly undermines its overall financial stability.
The budget parameters for the fiscal year 2023-24 reveal that debt servicing costs alone exceed Rs 7.3 trillion ($25.6 billion), representing half of the total budget spending and around 80 per cent of the country’s expected tax revenues, according to the newspaper.