Pakistan, grappling with financial challenges, is actively pursuing approximately USD 11 billion in funding from China and Saudi Arabia. This move is intended to bridge the gaps in both external and domestic resources and maintain the momentum of the IMF bailout program. The objective is to ensure economic stability until a new government takes office. This development comes in the context of the caretaker government’s efforts to broaden the tax base, particularly in the retail, agricultural, and real estate sectors, while continuing its crackdown on illegal currency movements.
According to a report in The Dawn newspaper, this information was disclosed in a comprehensive policy statement presented by the caretaker Finance Minister, Shamshad Akhtar, during a session of the Senate Standing Committee on Finance and Revenue. The meeting, chaired by Senator Saleem Mandviwalla, took place in Islamabad on Thursday.
Akhtar stated that the government is presently formulating an economic revitalization plan, which will be presented to the caretaker Prime Minister, Anwar ul Haq Kakar, in the near future. This plan will also be shared with the Senate Standing Committee on Finance.
While acknowledging that the caretaker government has limited scope for implementing deep structural reforms, Akhtar pledged to carry out the reforms specified in the International Monetary Fund (IMF) program. This commitment is crucial to ensure the release of a USD 700 million loan installment.
Negotiations with the IMF are scheduled to commence by the end of October. In June, Pakistan and the IMF reached a staff-level agreement on a nine-month Stand-by Arrangement (SBA) valued at approximately USD 3 billion.
The finance minister emphasized that the government’s top priority is to adhere to the IMF program in order to maintain economic stability and continuity.
Regarding the external financing gap, Akhtar pointed out that although Pakistan’s financing requirements remain substantial, concerted efforts by all stakeholders would enable the government to secure disbursements from project pipelines and revive some policy-based financing from multilateral sources.
She explained that external flows would see improvement with the USD 700 million from the IMF. To address the net bilateral financing of USD 11 billion, Pakistan has made funding requests to China and Saudi Arabia, and has also requested a Saudi oil facility.
“To meet the external financing requirements, we are working to secure concessional funding from multilaterals such as the World Bank, Asian Development Bank, and Islamic Development Bank, totaling USD 6.3 billion,” she stated in her written statement. Akhtar added that the IMF had already approved USD 3 billion, and bilateral assistance of around USD 10 billion was also anticipated.
Nevertheless, Akhtar cautioned that a “key risk to external stability comes from the rise in international commodity prices.” She noted that Brent crude oil prices had surged to USD 95 per barrel in September, marking a 27 percent increase from USD 74 per barrel in June.
Pakistan’s public debt has experienced a significant rise over the past two years, primarily due to currency devaluations and interest rate hikes.
She expressed concern that even the debt relief provided by G20 countries to impoverished nations had been utilized without ensuring high-return investments.
Akhtar mentioned that authorities are actively working on amending laws to bring the retail, agricultural, and real estate sectors into a more effective tax net. She emphasized that addressing twin deficits would be impossible without these measures.
Furthermore, Akhtar indicated that the caretaker government is seeking judicial support to resolve pending cases, which could generate an additional Rs 3 trillion.
The Election Commission of Pakistan (ECP) recently announced that the election is scheduled for the last week of January, after finalizing electoral districts based on census data collected earlier this year.