Pakistan likely to hunt for another IMF loan – Alfalah Securities Limited

Karachi: Keeping in view the rising concerns on how to repay foreign debt obligations in the absence of an external support, the economic managers of Pakistan are considering seeking yet another loan from the International Monetary Fund (IMF) amid fears that the country may be unable to repay an instalment of USD 1.35 billion (of which USD 0.4bn already paid) and USD 4.3 billion for the current and next fiscal year respectively.

According to Alfalah Securities Limited, IMF had disbursed Pakistan with USD 7.6 billion in multiple tranches under the Stand-By Arrangement (SBA) signed in 2008. The present government had consulted the IMF several times for seeking a new loan however; the monetary body had negated the government’s request due to non-compliance with their suggested economic reforms.

The IMF, in its latest report on the economic condition of Pakistan, has suggested that the country’s external financing requirements in FY13 may surge up to USD 10.5 billion while their ability to repay debt would weaken to a considerable extent. In a recent meeting of the IMF with Pakistani delegations, the agency has raised concerns over the deteriorating condition of economy on the external front and has stated that the present situation if prevailed for longer would devour the country’s forex reserves. On the other hand, the Finance Minister has stated that the recent decision of World Bank (WB) to assist financing for the development of Dasu Dam, indicates a sign of confidence by international financial bodies in the Pakistan’s economy. WB has expressed interest to assist in the financing of Dasu Dam having a power generation capacity of 1500 MW, to be built on the Indus River in Kohistan. The World Bank has also allocated USD 1.8 billion in FY12 for the development of energy sector projects in Pakistan. Alfalah Securities Limited believes the IMF, if agrees to lend Pakistan with another loan, would result in bringing fiscal discipline in the economy and would provide some respite to the vulnerability on the external front however the country would be pushed further down due to rising burden of debt obligations.