Dr. Murtaza Syed, the acting governor of the State Bank of Pakistan (SBP), said that Pakistan’s $33.5 billion external funding requirements for the fiscal year 2022–2023 (FY23) have been completely addressed, and that “unwarranted” market fears over its financial situation would fade in the next weeks.
“Our continuing IMF program is supporting our complete satisfaction of our external funding requirements over the next 12 months,” he said.
Last week, Pakistan and the IMF secured a staff-level agreement for the transfer of $1.17 billion in crucial cash under restarted bailout payments. The newly obtained staff-level consensus on the next IMF review, in the words of the senior central bank official, “is a very significant anchor that clearly differentiates Pakistan from fragile nations, most of which do not have any IMF assistance.”
Before the payout, which is anticipated in August and for which there are still previous policy steps to be completed, the lender’s board must ratify the arrangement, according to individuals with knowledge of the situation.
Since it is largely weighted toward concessional multilateral and official bilateral finance rather than costly commercial borrowing, Dr. Murtaza Syed said that Pakistan’s foreign debt is minimal, of relatively lengthy tenure, and on simpler terms.
He said that Pakistan’s debt-to-GDP ratio is 70%, with 40% of that amount coming from foreign debts and 7% from short-term loans. Fears over Pakistan’s faltering economy have increased as the rupee dropped by about 8% versus the US dollar in the most recent trading week, while foreign exchange reserves are below $10 billion and inflation is at its worst level in more than a decade. The governor of the central bank said that with $35.9 billion in available funding, $33.5 billion in gross external financing requirements could be “comfortably” covered.
The majority of the funding was shown via multilateral, oil payment facilities, and rollovers of bilateral finance, with Q2 of FY23 seeing the greatest financial demands. As soon as outside pressure started, Pakistan tightened its monetary policy and allowed the currency rate to decline, he said.
Since the epidemic, Sri Lanka’s primary deficits have been three to four times bigger than Pakistan’s, the governor said, making their financial situation much worse. In an environment of market panic brought on by a supercycle in commodity prices, the US Federal Reserve tightening monetary policy, and geopolitical tensions, Pakistan was being unjustly clubbed with more vulnerable nations. We anticipate this fact to become apparent in the next weeks, and the unjustified worries surrounding Pakistan will fade, he said.
Pakistan’s gold worth is $3.8 billion, but its foreign exchange reserves are $9.3 billion, according to Deputy Governor Dr. Inayat Hussain. Pakistan’s foreign exchange position is not concerning. He said that no complaints had been made to the SBP concerning banks or oil companies having trouble establishing LCs in Pakistan.
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