KARACHI: Pakistan’s Finance Minister Miftah Ismail said on Friday he was hopeful financing from “friendly countries” would be arranged before the International Monetary Fund’s (IMF) board meeting scheduled for later this month.
Pakistan, reeling from economic and political crises, has been actively seeking the revival of its stalled $6 billion loan program from the Fund. Islamabad has removed subsidies from its oil and power sectors to revive the loan, hoping it would be able to shore up its reserves, strengthen the rupee and save the country from a balance-of-payments crisis.
Last month, Ismail said Pakistan was expecting $1.2 billion in financing for oil payment on deferred payment [basis] from a friendly country while another would facilitate it with gas supplies on deferred payments. He said another country would also invest $1.5 billion to $2 billion in its stocks on a G2G basis.
“We are in talks with friendly countries,” Ismail told Arab News on the sidelines of the Gong ceremony held at the Pakistan Stock Exchange in Karachi. “There is time in the [IMF] board meeting and hopefully, it would be done (funds would be arranged).”
Though the finance minister refrained from naming the friendly countries he spoke about, it is largely understood that he meant Saudi Arabia, United Arab Emirates, Qatar and China, all close allies of Pakistan.
Pakistan signed a staff-level agreement with the IMF last month to resume the loan program. This week, the Fund’s top official in Islamabad confirmed Pakistan had met the final precondition for the seventh and eighth review of the loan program and that the board’s meeting is tentatively scheduled for late August.
As the finance minister said talks with friendly countries were underway, local media reported that the country’s army chief, General Qamar Javed Bajwa, discussed Pakistan’s IMF program with authorities in Saudi Arabia and the UAE.
Local media had also reported earlier that Bajwa had spoken to United States Deputy Secretary of State, Wendy Sherman, to seek support for the early disbursement of $1.17 billion to Pakistan.
Ismail said China had also rolled over its deposits [of $2 billion] at lower interest rates and other countries are also willing to do the same.
“China has rolled over its deposits with Pakistan and other countries are also in process of rolling over,” Ismail said, adding, “I will not talk about the interest rate but it is lower than the previous rate.”
Speaking at the event earlier, Ismail said when he took over the reins of Pakistan’s finances a few months earlier, the country was on the verge of default. “I approached the IMF immediately after becoming finance minister because we did not have [any] other option,” he explained.
Ismail credited the rupee’s recent appreciation in value to the government’s move to curb imports, adding that they declined to $4.9 billion in July 2022 from $7.7 billion in June. He said the import payment pressure on the rupee had eased, causing it to regain value.
“The drastic appreciation of the rupee was due to more dollars coming in as compared to going out [of the country],” he said. “We did it by curtailing imports from $7.7 billion and it solved problems. Now, payment pressure will automatically be reduced.”
Ismail vowed that Pakistan will not increase its imports, at least for three months. “I understand that growth will be reduced, but I have no other choice,” he said.
Pakistan’s rupee has appreciated by around 6.6 percent since hitting an all-time low at Rs 239.94 against the US dollar on July 28, 2022. Due to curbs on imports and retirement of import payments, analysts said the value of the rupee had increased. The currency on Friday closed at Rs 224.04 with a gain of 0.94% against the greenback.
Responding to a question about the rupee valuation, the finance minister said according to the Real Effective Exchange Rate (REER) the dollar was overvalued against the rupee. “But the dollar has appreciated against almost all currencies and has made a 22 years record,” he said.
The finance minister also assured banks that the tax on the advance-to-deposit ratio (ADR) will be rationalized.
On Friday, Pakistan stocks closed the weekend session on a bullish note with the benchmark KSE 100 index gaining 670 points.
"The bullish trend was witnessed on the strong rupee and easing trade deficit due to reduced imports," Ahsan Mehanti, CEO of Arif Habib Corporation, told Arab News.
"Strong financial results in the cement sector and reports of the Chief of Army Staff’s (COAS) discussion on the IMF deal with UAE and Saudi Arabia and speculations over the release of IMF bailout funds this month played a catalyst role in the bullish activity,” he added.
