G-20 News

EFF program commitments: IMF urges all major bilateral creditors to maintain exposure to Pakistan

ISLAMABAD: The International Monetary Fund (IMF) has urged all major bilateral creditors to maintain their exposure to Pakistan in line with commitments under the Extended Financing Facility (EFF) program, as the country’s gross external financing needs are estimated at 35.068 billion dollars for 2022-23, i.e. 10.1% of GDP.

The IMF, in its report entitled Article IV Consultation, Sixth Review under the Extended Arrangement under the Extended Financing Facility, and Requests for Waivers of Applicability and Non-Compliance with Performance Criteria and access rescheduling, projected Pakistan’s gross external financing needs at $30.417 billion for 2021-22 or 9.5% of GDP and $41.882 billion for 2023-24 or 11.2% of GDP.

The report notes that financing commitments from bilateral and multilateral partners, and the temporary suspension of debt service to official bilateral creditors granted under the G20 DSSI initiative, will cover gross public external financing needs. in FY2022 and until the end of the program in October 2022. Overall, major bilateral creditors have increased their exposure to Pakistan in recent months, and one creditor has restored its original exposure and all other maintain theirs.

The DSSI covers approximately $3.8 billion maturing from May 2020 to December 2021, of which approximately: (i) US$1.1 billion relates to the second round of the DSSI covering debt service from January to June 2021; and (ii) $1.0 billion for the third DSSI cycle covering July-December 2021.

Official FY2022 funding includes support from China ($6.6 billion, including $4 billion rollover of SAFE deposits), United Arab Emirates ($2 billion rollover), the World Bank ($2.4 billion), the Asian Development Bank ($1.2 billion). ), the Islamic Development Bank ($1 billion) and other bilateral aid under the G20 initiative ($1 billion).

IMF Executive Board Approves Sixth Review of Pakistan’s Expanded Financing Facility: Shaukat Tarin

Pakistani authorities noted that current projections suggest that with the policies outlined, gross external financing needs for FY2022 will amount to $26 billion, including about $10 billion in write-offs to official creditors and multilateral and bilateral trade. To bridge this gap, the government secured funding commitments from bilateral and multilateral partners: China $6.6 billion, United Arab Emirates $2 billion, World Bank $2 billion, Asian Development Bank $1.5 billion and the Islamic Development Bank $1 billion.

Importantly, major bilateral creditors maintained their exposure to Pakistan in line with program financing commitments.

In addition, the government continues to benefit from the temporary suspension of debt service to official bilateral creditors under the G-20 DSSI initiative, which will cover $1.0 billion maturing between July and December 2021 (third cycle of DSSI).

Pakistan’s capacity to repay the IMF is adequate subject to program implementation.

The IMF’s exposure reaches SDR 5,560.34 million (274% of quota and about 40% of gross reserves) with this review.

With full purchases, it will peak at 344 percent of quota in 2022. low reserves, could compromise program objectives and erode repayment capacity. and debt sustainability. Uncertainty regarding global economic and financial conditions in the context of the Covid-19 pandemic has added to these risks.

The strong program monitoring framework (including ongoing quarterly reviews and updated program conditionality, targeted technical assistance in support of program implementation, and adequate execution of existing funding commitments are strategies essential mitigation.

Copyright Business Recorder, 2022