Pakistan eyes $2.35 billion from other donors in FY2022

ISLAMABAD: Following revival of IMF loan, Islamabad aims to fetch $2.35 billion from multilateral creditors and launch Environmental, Social, and Governance (ESG) related international bonds this fiscal year to keep economy out of the way of depression and on the path to recovery.

After receiving a Letter of Comfort (LoC) from the IMF, Pakistan will be in a better position to negotiate programme loans with World Bank (WB), Asian Development Bank (ADB), and Asian Infrastructure Investment Bank (AIIB) to secure much-needed dollar inflows.

These programme loans, if secured, will help the government ensure projected dollar inflows of over $16 billion from all possible avenues during this fiscal year.

“The government is also considering making a fresh request to World Bank for raising loan amount from $350 million to $500 million under Resilient Institutions for Sustainable Economy (RISE-II) after successful revival of IMF programme” top official sources confirmed to The News here on Friday.

World Bank had declined to entertain this request in the past on the pretext the IMF programme was not yet revived and secondly, they required a higher approval with increased funding amount. Pakistan intends to make fresh request because AIIB has committed to match the funding for making RISE-II successful.

For RISE-II, the government made a commitment the harmonisation of General Sales Tax (GST) among the center and provinces. The Council of Common Interest (CCI) will have to take lead to evolve consensus among the center and provinces. Once all stakeholders had broadly evolved a consensus but later it proved futile because bureaucracy could not ensure follow-up with stakeholders, especially Sindh, on account of removing their valid observations.

Pakistan is negotiating another loan programme with the World Bank called ‘Pakistan Program for Affordable and Clean Energy (PACE) – II’ in order to shrink the monstrous circular debt by cutting down power generation costs, decarbonising the energy mix, improving efficiency in distribution, and retargeting electricity subsidies.

The World Bank so far committed $600 million for PACE-II, also shown on its website, but the official sources said the Bank might provide $300 million.

The loan amount has not yet been finalised but the official sources confirmed the efforts would be made to get approval of these two programme loans from the World Bank during the second half till June 2022.

From ADB, Pakistan is expecting $300 million loan for capital market development during the second half of the current fiscal year. Although, the amount has not yet been firmed up so far, authorities are expecting at least $300 million will get approval before June 2022.

The government is also planning launching ESG bond to fetch $1 billion from the international market. For this, the government is going to present its Billion Tree Tsunami or Ehsaas Programme for generating $1 billion and the equivalent amount in rupees will have to be transferred for any such programme.

With the approval of programme loans in the second half, the overall disbursements of loans and grants is expected to go up because in the first 6 months of this fiscal year, the government had fetched over $9.4 billion mainly through commercial loans and international bonds.

The government is expecting only $5.7 billion from the multilateral creditors this fiscal and after securing the letter of comfort from the IMF, the programme loans will be approved.

The improved loan disbursement is necessary for avoiding depletion of foreign exchange reserves, which had already nosedived to over $15.7 billion held by the State Bank of Pakistan on January 28, 2022.

Pakistan will have to pay back foreign loans amounting $8.6 billion on account of both principal and mark-up, out of which $1.860 billion would be paid back to multilateral donors, $1.310 billion to bilateral donors, and a major chunk of $5.353 billion to commercial banks, bonds/sukuks, and the IMF. The foreign loan repayment on account of PSEs guarantees has been projected at $114 million in the second half of the current fiscal year, so total outstanding foreign debt liabilities have climbed to $8.63 billion.