ISLAMABAD:
Pakistan will require over $19 billion in external financing for the 2025-26 fiscal year, as highlighted in a new IMF staff-level report released shortly after the Fund approved a $1 billion loan tranche and a $1.3 billion climate financing package for the country.
Key Points from the IMF Report:
1. External Financing Needs:
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Total gross external financing need: $19.3 billion.
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Includes $1.5 billion for the current account deficit, and the rest for foreign debt repayments.
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Pakistan has secured $17 billion through new loans and rollovers, leaving a $2.4 billion financing gap.
2. Limited Access to Funding Sources:
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Traditional financing sources are shrinking:
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Saudi oil facility: Only $800 million expected (vs. $1.2 billion desired).
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Resilience and Sustainability Facility (RSF): $410 million expected.
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Sovereign bonds: $400 million, mostly from China.
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Foreign commercial banks: Just $85 million in net new borrowing.
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No budget support expected from the World Bank.
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Asian Development Bank to provide $250 million.
3. Trade and Tariff Concerns:
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US tariffs are expected to negatively impact Pakistan’s exports and GDP, causing a slight downgrade in FY25 growth projections.
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Indirect impacts include:
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Slower growth among trading partners,
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Tighter global financial conditions,
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Possible reduction in remittances,
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Increased policy uncertainty.
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4. Macroeconomic Outlook:
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Current account deficit (FY24) revised down to $229 million (from $3.6 billion), due to:
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Strong exports,
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Improved remittance inflows,
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Greater exchange rate stability.
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Over the medium term, deficit expected to widen modestly to 1% of GDP.
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Foreign exchange reserves projected to strengthen, supported by multilateral and bilateral aid.
5. Debt and Repayment Outlook:
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Pakistan’s public debt is sustainable over the medium term, though near-term stress remains high.
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IMF repayments will peak at $13 billion in September 2027, which is:
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466% of Pakistan’s IMF quota,
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About 51% of projected foreign reserves.
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Repayment capacity has improved slightly but remains fragile and hinges on:
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Strong policy implementation,
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Consistent external financing.
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6. Risks Highlighted:
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External:
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Geopolitical shocks,
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Commodity price spikes,
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Stronger US dollar, and
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Global trade restrictions.
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Domestic:
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Policy slippages, especially under pressure to ease taxes and offer subsidies,
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Rising political or social tensions that could derail reforms.
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Pakistan’s economic outlook remains precarious, with heavy dependence on external financing and multilateral support. The country faces constrained access to commercial markets, reduced support from traditional allies, and external risks such as US tariffs and volatile global financial conditions. While the IMF believes the debt trajectory is manageable, the success of Pakistan’s economic stabilization hinges on disciplined policy reforms, fiscal consolidation, and geopolitical stability. Failure to address these risks could jeopardize economic recovery and debt sustainability.
