Inflows improved in July: IMF SBA gives comfort level to multilaterals, bilaterals: MEA officials

ISLAMABAD: The staff level agreement on the Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) reached on 29 June 2023 provided a comfort level to multilaterals/bilaterals and resultantly inflows improved during the first month of current fiscal year 2023-24.

This was stated by senior officials at the Ministry of Economic Affairs while talking to Business Recorder, which was seconded by economist Dr Kaiser Bengali.

Dr. Bengali said the successful conclusion of SBA with IMF provided a short-term comfort level to multilaterals/bilaterals and that was one of the reasons behind the increase in inflows. Cash deposits from friendly countries were another reason behind the good inflows in July, he added.

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The EAD data shows that the country borrowed $2.890 billion from multiple financing sources during the first month (July) of the current fiscal year 2023-24 compared to $185 million during the same period of 2022-23.

The $2.890 billion included $2 billion from Saudi Arabia under the head of time deposits during July 2023. However, it does not include the $1.2 billion received as the first tranche of the $3 billion SBA from IMF and $1 billion from United Arab Emirates (UAE). In total the country received $5.09 billion in July, the highest inflow in one month in the recent past, the officials added.

IMF has projected Pakistan’s gross external financing needs at $28.361 billion for fiscal year 2023-24 which is 8 percent of GDP. However, officials stated that it would depend on the continuation and successful completion of IMF SBA. “If the country fails in implementing the agreed policies and actions under the SBA, the country would face significant challenges in meeting the financing needs projected for the current fiscal year,” officials stated.

The government had budgeted foreign assistance of $22.817 billion for the fiscal year 2022-23 including $7.5 billion from foreign commercial banks. However, only $10.844 billion materialized during the last fiscal year. This does not include the rollover of friendly countries’ deposits amounting to $6 billion (i.e. $3 billion each from China and Saudi Arabia), and re-financing of Chinese loan of $1.3 billion.

Against the budgeted $7.5 billion from foreign commercial banks, only $2.206 billion materialized i.e. a shortfall of $5.266 billion was registered during the fiscal year 2022-23. Further the government had budgeted $2 billion from issuance of Sukuk bonds, but failed to meet the target after all the credit agencies including Moody’s and Fitch downgraded the country’s ratings due to the stalled IMF Extended Fund Facility (EFF) programme.

For the current fiscal year the government has budgeted $4.5 billion from foreign commercial banks and $1.5 billion from issuance of bonds.

The June 2023 foreign inflows were $2.231 billion (including $1.306 million from commercial banks), $491.69 million in May, $358.61 million in April and $358.71 million in March 2023.

The country received $193.64 million from multilaterals and $113.88 million from bilaterals during July 2023-24. The non-project aid was $2.250 billion including $2.083 billion for budgetary support and project aid was $640.11 million. The country received $508.34 million under the head of guaranteed CATIC (PAF).

Asian Development Bank (ADB) disbursed $22.59 million during the period under review compared to the budgeted $2.086 billion for the fiscal year 2023-24.

China disbursed no money in July, however, the government has budgeted $18.54 million from China for the current fiscal year. Saudi Arabia disbursed $100 million against the budgeted $600 million under the head of oil facility during July 2023-24. USA disbursed $8.17 million in July against the budgeted $21.60 million for the fiscal year. Korea disbursed $4.85 million and France $0.56 million during July 2023.

IDA disbursed $82.71 million in July against the budgeted $1.489 billion for the current fiscal year and IBRD $3 million against the budgeted $840.36 million. IsDB (Short-term) disbursed $67.23 million in July against the budgeted $500 million for the current fiscal year and AIIB disbursed $11.74 million, while IFAD disbursed $6.38 million against the budgeted $42.68 million for the current fiscal year.

Copyright Business Recorder, 2023