Summary:
- IMF Executive Board to approve $7 billion facility on August 28.
- China, Saudi Arabia, and UAE extend $12 billion loan rollover for one year.
- Pakistan aims for improved credit rating and favorable bond terms.
There will be no delay in the IMF Executive Board meeting, which is set to occur by the end of this month to approve the $7 billion Extended Fund Facility, according to Aurangzeb. The meeting is scheduled for August 28th, ending uncertainty over its timing, which depended on the rollover of debts by Pakistan’s main creditors.
Aurangzeb confirmed that China, Saudi Arabia, and the UAE will roll over $12 billion in loans for one year, maintaining the previous terms. Although the IMF had initially requested a three- to five-year rollover, the government is working to extend this period. The IMF had announced a staff-level agreement for the $7 billion package last month, contingent on Executive Board approval and securing financing from bilateral and multilateral creditors.
The finance minister noted that with Pakistan’s foreign exchange reserves stronger than a year ago, there was no need to increase interest rates on these loans. The IMF had identified a $3-5 billion financing gap over the three-year program, which is manageable. Aurangzeb mentioned that Pakistan had received an offer from a foreign commercial bank but would wait for IMF Board approval to negotiate lower interest rates.
Standard Chartered Bank had offered a loan of less than $400 million with a double-digit interest rate, which the government deemed unaffordable. The government plans to negotiate this rate once IMF approval is secured.
Aurangzeb highlighted two recent positive developments: Fitch’s upgrade of Pakistan’s credit rating to CCC+ and the central bank’s 1% interest rate cut. He expressed hope that all three major credit rating agencies would improve Pakistan’s rating to B- by year-end, allowing for more favorable terms in international capital markets.
The finance minister also discussed plans to issue Panda bonds in China by the end of this year or early 2025 and potentially hire another Chinese financial adviser for energy debt rollover negotiations. Additionally, the government is considering measures to reduce expenditures, including privatization and restructuring of federal ministries.
Main Author: Shahbaz Rana
Source: Tribune
