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Pakistan Hoping to Secure $2bn in External Funding Pre-Budget
June 8, 2023
Pakistan is in the midst of efforts to secure $2bn in external funding to meet its $6bn funding gap ahead of its budget announcement tomorrow. Pakistan has already secured about $4bn in external funding till date and these funds are crucial for them to resume their long-delayed bailout program with the IMF. The $6.7bn IMF program has been stalled for six months and is slated to expire in June, with the external financing gap and exchange-rate policy being cited as some of the biggest obstacles. Saudi Arabia and UAE have already committed to provide $3bn of fresh funding to Pakistan. Also, China and its state-owned banks have rolled over $4bn in loans. Pakistan’s Ministry of Finance emphasized that Pakistan “remains committed to completing the IMF program and has already demonstrated its seriousness”. It added that Pakistan is committed to mobilizing additional liquidity despite significant contraction of its current-account deficit which has reduced the requirement. In response, the IMF reiterated its stance that the program will resume once there is “proper market functioning” of the Pakistani rupee and if the government follows the IMF program goals and adequate financing when it presents the budget.
Pakistan’s dollar bonds are trading at distressed levels, but have rallied as much as 5% since the beginning of the month. Its 7.95% 2029s are up 5.1% this month to trade at 48 cents on the dollar.
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