Pakistan seeks incremental funding from S Arabia, loans from UAE banks

ISLAMABAD: Owing to an external financing gap of $2 to $3 billion, Pakistan has requested the Kingdom of Saudi Arabia (KSA) for the provision of incremental deposits and engaged with UAE-based commercial banks for securing assurances to fulfill the demands of the IMF.

Besides seeking incremental funding to bridge financing gap of $2-$3 billion for the current fiscal year, Pakistan is also engaged with KSA, China, and UAE for securing rollover of $12 billion deposits lying with the State Bank of Pakistan for the current fiscal year.

Additionally, there is a requirement for incremental funding of $2-$3 billion for fulfilling the IMF demands. The combination of KSA funding as incremental and the resumption of loans from Middle Eastern banks might help Islamabad to bridge the financing gap ranging from $2 to $3 billion for the current fiscal year.

The Governor State Bank of Pakistan (SBP) Jameel Ahmed had recently made deliberate efforts to downplay the burning issue of the external financing gap and he had shifted the buck to the Finance Ministry.

Top official sources confirmed to The News on Friday that the IMF identified a $2-$3 billion external financing gap that caused a delay in approving a $7 billion bailout package under Extended Fund Facility (EFF) from August to September 2024.

“We are now in the process of securing confirmation from bilateral partners and resumption of commercial loans from Middle East-based banks,” top official sources confirmed while talking to a few journalists here on Friday.

Pakistani authorities made a request with Saudi Arabia’s Finance Minister in recent weeks for completion of the IMF conditions and securing approval of a $7 billion EFF package from the Executive Board of the Fund.

Pakistani authorities are confident that they had established contacts with the top guns of bilateral partners while in recent weeks Pakistan approached UAE-based commercial banks so the IMF’s Executive Board was expected to grant its assent on $7 billion EFF package by September 2024, however, the authorities refrained from sharing any specific dates. Out of incremental funding of $2 to $3 billion financing gap, Pakistan has requested KSA for additional funding of over $1 billion. KSA has not yet granted its confirmation but they are evaluating their options on how to help Pakistan for securing an IMF deal for getting a bailout package of $7 billion.

The IMF’s assessment of the external financing gap for three years was on the higher side in the range of $6 to $8 billion but Pakistani authorities believed that the gap of the first fiscal year 2024-25 was more problematic and in subsequent years they would be in more comfortable position to bridge the financing gap over 37 months period.

When asked how this financing gap would be bridged over 37 months period, the official replied that after securing the IMF program and obtaining the first tranche, there were expectations that the country’s credit ratings would be improved significantly then Islamabad would be able to obtain commercial loans from Middle Eastern banks as well as re-appearing on the radar screen of international capital market for launching international bonds.