Pakistan's financing needs fully met for the year: Central bank chief

ISLAMABAD • Pakistan's US$33.5 billion (S$46.6 billion) external financing needs are fully met for financial year 2022/2023, the country's central bank chief said yesterday, adding that "unwarranted" market concerns about its financial position will dissipate in weeks.

Fears have risen about Pakistan's stuttering economy as its currency fell nearly 8 per cent against the United States dollar in the last trading week, while the country's forex reserves stand below US$10 billion with inflation at the highest in more than a decade.

"Our external financing needs over the next 12 months are fully met, underpinned by our ongoing IMF (International Monetary Fund) programme," the acting governor of the State Bank of Pakistan, Mr Murtaza Syed, told Reuters in an e-mailed reply to questions.

Pakistan earlier this month reached a staff-level agreement with the IMF for the disbursement of US$1.17 billion in critical funding under resumed payments of a bailout package.

"The recently secured staff-level agreement on the next IMF review is a very important anchor that clearly separates Pakistan from vulnerable countries, most of whom do not have any IMF backing," Mr Syed said.

However, the lender's board needs to approve the agreement before the disbursement, which is expected next month, before which there remain prior policy actions to be fulfilled, according to sources familiar with the matter.

But some question Pakistan's ability to meet external financing needs, including debt obligations, despite the IMF funding.

Mr Syed played down those concerns, saying Pakistan's public debt profile, one of the "main flashpoints" for markets these days, is a lot better than in vulnerable countries with high public debt. The country's public debt-to-gross domestic product ratio is 71 per cent.

"Pakistan's external debt is low, of relatively long maturity, and on easier terms since it is heavily skewed towards concessional multilateral and official bilateral financing rather than expensive commercial borrowing," he said.

In a recent presentation to international investors, Mr Syed said US$33.5 billion in gross external financing needs would be met "comfortably" with US$35.9 billion in available financing.

Most of the financing was from multilaterals, oil payment facilities, and rollovers of bilateral financing, and the heaviest financing needs were in the second quarter of FY2022/2023.

The presentation also compared the situation in Pakistan with that of Sri Lanka, which recently defaulted, and said: "Pakistan tightened monetary policy and allowed the exchange rate to depreciate as soon as external pressures began."

REUTERS