Special Report :
Pakistan’s Chief of Army Staff General Qamar Javed Bajwa has appealed to the United States to help Islamabad secure an early dispersal of $1.2 billion in funds under the IMF loan programme, Nikkei Asia reported, as Pakistan faces the risk of debt default due to dwindling foreign reserves.
The army commander is making ‘appeals’ to the United Statesalong with his meetings with Prime Minister Shehbaz Sharif about steps to do to restore economic confidence.
Pakistan Foreign Office (FO) last Friday confirmed that US Deputy Secretary of State Wendy Sherman and Chief of Army Staff General Qamar JavedBajwa had spoken. Last week, Pakistan’s Finance Minister was confronted by representatives of Chinese power producing businesses who sought payment of Rs260 billion in outstanding dues and the opening of a bank account to protect them from a vicious cycle of debt. Representatives from the companies informed them that if they do not receive the money, they would have to shut down their
facilities due to severe financial difficulties.
The IMF has linked Beijing’s willingness to alter the conditions of energy contracts and the payment of the debts owed by the Chinese power plants.
Pakistan’s imports are expected to remain around $4.8 billion this month -down by nearly 36% compared with the preceding month. However, the exports also significantly reduced to around $2.2 billion.
The sources claimed that one of the factors contributing to the postponement of calling the IMF board meeting to authorize the loan tranche was the state of the economy between Pakistan and China. The energy contracts for the China-Pakistan Economic Corridor had previously been renegotiated, as requested by the IMF. The IMF denies making such a demand, but it has stated that because to current fiscal constraints, all parties involved should equitably share the burden.
Pakistan’s economy needs around US$31 billion to be saved. As part of the estimated $31 billion in finance, which is less than the $35.1 billion in total requirements, Pakistan is in desperate need of these cash. According to the sources, any shortfall compared to this planned financing will make Pakistan’s argument to the IMF much more difficult.
The problem was also discussed between the civilian and military leadership. Pakistan also needs to secure $4 billion from friendly nations in addition to these money. Although the military put in some effort to obtain these money, progress was being made slowly.
On a brighter note, data released by Pakistan’s central bank last week revealed that remittances sent by Pakistani workers abroad, its primary source of foreign currency on a net basis, increased to an all-time high in the most recent fiscal year, which concluded on June 30.
In July-June FY2022, Pakistan received $31.2 billion in remittances from abroad, a 6.1 percent rise from $29.4 billion the year before. In June, remittances reached $2.76 billion, an increase of 18.4% month over month. In June, these inflows increased by 1.7% compared to the prior year.
Remittance inflows increased as more people used official channels to send money home and as digital apps were developed to transfer money because there was less air travel owing to the pandemic in the latter part of FY2022. The surge in remittances was also aided by the government’s digitalization initiatives and the incentives offered to Pakistanis living abroad through the SohniDharti and Roshan Digital Account transfer programs. The June remittances report, however, was thought to be a reflection of seasonal circumstances. More money is sent home by Pakistanis living abroad to buy sacrifice animals for the EdulAzha holiday.
This fiscal year, the government expects remittances to reach $32.5 billion. The cash-strapped government is benefiting from robust remittance flows despite the SBP’s foreign holdings declining by $99 million to $9.71 billion during the week ended July 7.
However, the increase in remittance flow is insufficient to fend off Pakistan’s balance of payment crisis.
In order to complete the seventh and eighth evaluations of the Extended Fund Facility, the government and the International Monetary Fund were able to come to an agreement at the staff level last week.
If the IMF board approves it, the nation will soon-possibly next month-receive $1.17 billion. However, in order to pay for imports and service its foreign debt in FY2023, the government will still need to secure billions of dollars in outside funding.
