Pakistan is likely to get $4 billion from friendly countries this month to bridge a gap in foreign reserves highlighted by the International Monetary Fund (IMF), the country's finance minister said, two days after sealing a deal with the lender.
The IMF has reached a staff-level agreement with Pakistan that would pave the way for a disbursement of $1.17 billion. The board is also considering adding $1 billion to a $6 billion program agreed in 2019.
“As per the IMF, there is a $4 billion gap,” the minister, Miftah Ismail, told a news conference in Islamabad, referring to the shortfall in foreign reserves.
“We will, God willing, fill this gap in the month of July,” he said. “We think that we will get $1.2 billion in deferred oil payment from a friendly country. We think that a foreign country will invest between $1.5 to $2 billion in stocks on a G2G (government-to-government) basis, and another friendly country will perhaps give us gas on deferred payment and another friendly country will make some deposits.”
Depleting reserves, a widening current account deficit and the depreciation of the Pakistani rupee against the U.S. dollar have left the South Asian nation facing a balance of payment crisis.
Without the IMF deal, which should open up other avenues for external finance, Ismail said the country could have headed towards default.
He said the country will also get around $6 billion from the World Bank and the Asian Development Bank in the 2022-2023 financial year.
Pakistan secured a $6 billion IMF program in 2019, but less than half of that amount has been disbursed to date.
Its foreign currency reserves have fallen as low as $9.8 billion, hardly enough for five weeks of imports.
Having come to power just two months ago, Prime Minister Shahbaz Sharif’s government is tasked with slashing the fiscal and current account deficits under the IMF program.
The central bank has already jacked up its policy interest rate to 15% to counter the inflation, which ran at 21.3% in June.
The new government has withdrawn the unfunded subsidies that the previous prime minister, Imran Khan, gave to the oil and power sectors during his last days in office. On July 1, it also imposed a levy on petroleum that will raise prices by about 70% within a month.