Pakistan has assured the IMF that, despite initial delays, it remains hopeful about the rescheduling of Chinese loans. Oil will be obtained from Saudi Arabia on deferred payments to fill the $5 billion external funding gap.
These hopes are tied to the assurances given by the executive directors of these countries to the IMF Board at the time of approval of the $7 billion bailout package.
The government has also requested the IMF delegation, which is visiting, to reconsider its condition of forcibly amending the Pakistan Sovereign Wealth Fund Law by the end of December. The IMF has not responded to this request as of yesterday.
Pakistan has hired Alvarez and Marsal Advisory Services to present its case before the IMF. Dr. Reza Baqar, former Governor of the Central Bank and Managing Director of Alvarez, also attended the IMF meeting yesterday.
Sources indicated that the IMF received a briefing on the external financing commitments necessary to fill the $5 billion funding gap from 2024 to 2027. Pakistan reassured the IMF once again that China’s Exim Bank would roll over the $3.4 billion project loan, and Saudi Arabia would provide $1.2 billion in financing.
However, there has been no significant progress on these issues yet, although China is in contact with the government regarding this matter. The executive directors of these countries had made direct assurances to the IMF Board, and the government is hopeful that these transactions will be completed soon. The external financing gap for the 2024-2027 period is $5 billion, with an estimated $2.5 billion for the current fiscal year.
At the time of the $7 billion package, Pakistan was optimistic about collecting $3.2 billion against the $2.5 billion loan requirements. This includes $1.2 billion from the Saudi oil facility. Every month of delay in finalizing the oil facility results in a $100 million shortfall in available funds for the fiscal year. Pakistani officials are hopeful of convincing the Saudi government to extend this facility.
After the rescheduling of the $3.4 billion loan from China’s Exim Bank, around $750 million is due for the next 11 months. The Exim Bank loan for the Chinese project worth $2.7 billion will be completed from October 2025 to September 2027.
Finance Minister Mohammad Aurangzeb Kapp was on a three-day foreign visit to attend the 29th meeting. According to the Ministry of Finance, he will participate in the final day’s talks with the IMF today.
In September of this year, the government agreed to the IMF’s demand to amend the Pakistan Sovereign Wealth Fund Act, which aims to end secrecy in its financial and governance matters and to ban the direct sale of assets to foreign countries.
The PDM government had initially implemented the PSWF Act to transfer shares of seven profitable institutions and then sell them abroad to raise funds. Currently, the sovereign fund has the authority to manage the sale and purchase of domestic and foreign equity securities, debt securities, derivatives, commodities, and other financial assets.
The current law allows the Sovereign Fund to participate in the privatization process in order to acquire ownership of public institutions or provide financial advisory services in the privatization process. If the amendments prepared by the IMF are approved by Parliament before the end of next month, all these special rights will be terminated.
