The International Monetary Fund (IMF) has projected Pakistan’s gross external financing needs at $18.813 billion for the current fiscal year 2024-25, which represents 4.7 percent of the country’s GDP.
In its latest report, titled “2024 Article IV Consultation and Request for an Extended Arrangement under the Extended Fund Facility,” the IMF noted that external financing needs are expected to rise to $20.088 billion in the fiscal year 2025-26. The report also highlighted that available financing for FY 2024-25 is approximately $18.175 billion.
The IMF indicated that the program is fully financed, with firm commitments in place for the first 12 months and positive prospects thereafter. Financing for FY 2025 includes $16.8 billion from rollovers of existing short-term financing and $2.5 billion from additional commitments, particularly from China, Saudi Arabia, the Asian Development Bank (ADB), and the Islamic Development Bank (IsDB).
The authorities have secured firm commitments from key bilateral partners to maintain their existing exposures throughout the program. This includes rolling over short-term liabilities, which will help meet financing needs in the remaining program period. Loans from foreign commercial banks totaling $6.6 billion, renewed during the 2019 Extended Fund Facility (EFF) and 2023 Stand-By Arrangement (SBA), are also expected to continue during the new program period. Together with commitments from multilateral institutions, these provide necessary financing assurances. However, financing risks remain high, necessitating continued monitoring to ensure timely and adequate funding during program reviews.
The IMF projected that multilateral disbursements could reach $14 billion from FY 2025 to FY 2028, including $7.1 billion from the World Bank and $5.6 billion from the ADB. Key bilateral creditors are expected to maintain their exposure through new financing activities. Modest access to new short-term borrowing from commercial banks is anticipated for FY 2025-26, with a gradual return to bond markets expected by mid-FY 2027, indicating a restoration of policy credibility.
Pakistan’s capacity to repay is subject to significant risks and remains critically dependent on effective policy implementation and timely external financing. The IMF’s exposure to Pakistan is projected to reach SDR 6,816 million by September 2024 (336 percent of quota), with purchases linked to the request. Completion of all purchases under the arrangement could peak the Fund’s exposure at SDR 8,774 million (432 percent of quota) by September 2027, roughly 55 percent of projected gross reserves for FY 2027, which is about double the average for recent EFFs.
Exceptionally high risks, particularly from elevated public debt, substantial financing needs, low gross reserves, and sociopolitical factors, could threaten policy implementation and undermine repayment capacity and debt sustainability. Restoring fiscal and external viability is essential to ensure Pakistan’s capacity to repay the Fund.
This process hinges on strong and sustained policy implementation, including fiscal consolidation, external asset accumulation, and decisive reforms to facilitate stronger and more resilient economic development.
The Pakistani authorities have asserted that they have secured sufficient financing from international partners to support their economic reform program and sustainably enhance external buffers. Current projections suggest that, after considering pre-existing financial commitments, rollovers, and the anticipated IMF program, residual financing needs during the program period will amount to $5 billion.
“To close this gap for the first 12 months of the arrangement, we have secured financing commitments from bilateral and multilateral partners, including China, Saudi Arabia, the ADB, and the IsDB,” the authorities noted.
Furthermore, they have obtained renewed commitments from bilateral partners to continue rolling over short-term claims (including loans, swaps, and deposits) for the duration of the program, with plans to extend the maturity of these claims to alleviate the burden and risks associated with high gross financing needs.
