Pakistan is set to meet a dozen conditions in six months to stay in the USD 6 billion IMF programme, but the cash-strapped country's economic endurance still hinges on a USD 11 billion lifeline from China, according to a media report on Friday.
Pakistan is set to meet a dozen conditions in six months to stay in the USD 6 billion IMF programme, but the cash-strapped country’s economic endurance still hinges on a USD 11 billion lifeline from China, according to a media report on Friday. The Washington-based international lender on Thursday released its staff level report of the USD 6 billion programme, confirming that the government was in process of increasing electricity prices by Rs 5.65 per unit or 36 per cent from now till October, The Express Tribune newspaper reported.
This increase will put an additional burden of Rs 884 billion on the consumers by June 2023, according to the circular debt management plan, which the Cabinet approved last month as part of the actions to meet the conditions set by the International Monetary Fund, the report said. Additionally, the government will slap new taxes equal to 1.1 per cent of GDP or around Rs 600 billion in June as part of the IMF condition, it said.
These conditions are among 11 actions that the government will take by September this year. They are in addition to the five prior actions that the government took to convince the IMF board to approve its case. The government is implementing these actions to remain in the USD 6 billion IMF programme but at the same time, the report shows that Pakistan’s external financing needs are still largely met by continued support from its all-weather ally, China.
The country’s gross external financing needs — the funds that it needs to pay off foreign loans and finance its imports — amount to USD 27 billion over the next 12 months, according to the IMF. These financing needs will be met by support from China’s USD 10.8 billion, the UAE’s USD 2 billion, the World Bank’s USD 2.8 billion, the G-20’s USD 1.8 billion initiative, the Asian Development Bank’s USD 1.1 billion, and the Islamic Development Bank’s USD 1 billion, Pakistan informed the IMF.
The finance ministry told the IMF that key bilateral creditors had maintained their exposure to Pakistan in line with programme financing commitments. However, Saudi Arabia has already withdrawn the USD 3 billion it had committed. “China has maintained its exposure by renewing and augmenting the CYN (yuan) 30 billion, (about USD 4.6 billion) three-year bilateral currency swap”, the report confirmed.
The newspaper had previously reported that China had increased the size of bilateral currency swap from USD 3 billion to USD 4.5 billion to help Pakistan pay off Saudi loans. The IMF report further read that China had renewed the maturing commercial loans as part of the programme financing assurance commitment. China rolled over USD 2.5 billion commercial loans in this fiscal year and also plans to extend USD 4.4 billion in the next fiscal year.
The IMF report stated that China had also provided an additional USD 1 billion deposit in July 2020, raising the State Administration of Foreign Exchange (SAFE) deposits to USD 4 billion.