Finance for Development Lab’s Post

📈 Good News for Pakistan! 📈 Fitch Ratings has upgraded Pakistan’s Long-Term Issuer Default Rating to ‘CCC+’, up from ‘CCC’, thanks to the recent $7 billion IMF agreement. This upgrade reflects stronger external funding confidence and positive economic forecasts. With significant external financing secured and expected improvements in reserves and fiscal balance, Pakistan is on a path to economic stability. 🌟 #fitchratings #pakistanfinance #economicupdate #imf #ratingupgrade #financialnews #economicgrowth #pakistan #globalfinance #financialstability #externalfunding #investment #economy https://lnkd.in/d6EmHHnp

Pakistan Seeks Reform, But Can It Break the Cycle of Debt? Finance Minister Muhammad Aurangzeb is championing economic reform in Pakistan, advocating for the privatization of state entities as key to the country’s financial health. His stance, which diverges from the conventional view that IMF dictates reform, deems these changes crucial for Pakistan's economic survival—a sentiment echoed in the recent IMF accords calling for budgetary discipline and solid governance. A member of the elite with roots in feudalism, Aurangzeb represents a class traditionally resistant to industrial progression, favoring control over the vast rural populace. Their hesitancy is revealed in actions that have deliberately stifled industrialization. The elite's stranglehold is apparent in counterproductive policies and a taxation framework that deters rather than encourages business ventures, stifling growth, and innovation. Such obstructions have relegated Pakistan to a static industrial state, resulting in a shameful over-dependence on IMF bailouts—a pattern these financial aristocrats, Aurangzeb included, consistently support. Seventy-five years have unfolded with Pakistan trapped in a demeaning pattern of dependence, characterized by Prime Minister Shehbaz Sharif as a 'begging bowl' mentality. New leaders step into a legacy of debt, resorting to IMF stopgaps, only to return to financial negotiations again and again. This recurrent borrowing undermines the nation's economic progress and garners scepticism globally. Whereas regional peers advance through exports, Pakistan's stagnation hints at a preference for temporary IMF relief over tackling systemic economic flaws. The imperative to escape this relentless cycle and pursue lasting fiscal autonomy is clear. A reevaluation of domestic financial policies could resolve the national budget deficit, estimated at 6.9 trillion Pakistani rupees (around $2.5 billion). A reduction of the elite's $18 billion annual privileges, paired with measures such as lowering electricity to 10 rupees per unit and petrol to 100 rupees per liter, could potentially triple the national GDP to over $1 trillion within five years. Offsetting these lowered costs could be achievable by realigning the elite's subsidies—moving Pakistan toward a more equitable and economically dynamic future. #pakistan #pakistaneconomy #pakistantech #pakistanbusiness #pakistanstockexchange #lahore #karachi #islamabad #oilandgas #oilandgascompanies #IMF https://lnkd.in/dERJ8efT

Right now Pakistan needs to take a "common sense" decision, no "rocket science" required. 1. Ban luxurious cars (above 1500 cc), whether local assemble or imported & other luxury items. 2. Address the glaring corruption in Power Division & its subsidiaries; GENCOS, DISCO'S, NTDC, CPPA-G & NEPRA. This could bring prices of electricity down by 20-30%. 3. Stop sales tax theft in the cement and tobacco industry, etc.

IMF and Pakistan Reach Agreement for $1.1 Billion Bailout Disbursement Amid Economic Challenges IMF Agreement with Pakistan: The International Monetary Fund (IMF) has reached a staff-level agreement with Pakistan to disburse $1.1 billion for the debt-ridden South Asian economy. Purpose of Funds: The funds are part of a larger rescue package aimed at averting a sovereign debt default. This agreement follows a five-day review of Pakistan's fiscal consolidation benchmarks set for the loan. Market Reaction: Most Pakistan dollar bonds were trading higher after the deal was announced, indicating a positive response from investors to the agreement. Future Bailout Plans: Pakistan is seeking another long-term bailout and has expressed interest in formulating a medium-term program with the IMF. It has not officially stated the size of the additional funding it seeks, but reports suggest it may be at least $6 billion. Economic Challenges: Pakistan's economy faces significant challenges, including low reserves, a balance of payment crisis, high inflation at 23%, policy interest rates at 22%, and record depreciation of the local currency. Previous IMF conditions included revising the budget, raising interest rates, generating more revenues through taxes, and raising the prices of electricity and gas to address these issues.

The IMF has labeled Pakistan’s external debt repayment capacity as fragile, estimating the country will require $62.6 billion in external financing over the next three years under the Extended Fund Facility (EFF) program. Looking ahead, these financing needs could surge to $110.5 billion between 2024 and 2029. For the current fiscal year, the IMF anticipates financing needs of $18.813 billion, rising to $23.714 billion by 2026-27. High public debt, low foreign reserves, and sociopolitical instability pose significant risks to Pakistan’s repayment ability. However, a reduced gross financing requirement for FY25, dropping to $18.8 billion, provides a more hopeful scenario. . . . #PakistanEconomy #IMF #DebtRepayment #EconomicStability #Finance #Tribunetrends

Pakistan reaches to IMF for a $6 billion bailout - Bloomberg PAK aims to engage in negotiations for an Extended Fund Facility with the IMF in March 2024. Last summer, PAK narrowly avoided default with a short-term IMF bailout, as the program nears expiration next month, the incoming government will need to secure a longer-term arrangement to stabilize the $350 billion economy. PAK implemented several measures mandated by the IMF, including budget revisions, a rise in the benchmark interest rate, and adjustments in electricity and natural gas tariffs. Fitch Ratings emphasized the importance of securing financing from multilateral and bilateral partners for PAK, failure to obtain a new loan could exacerbate liquidity stress and elevate default risks. Pakistan faces $25 billion in external debt payments in the fiscal year, a considerable sum compared to its foreign exchange reserves. The EFF loans typically span 3 - 4 years and support structural reforms, with repayments scheduled over 4.5 to 12 years. Political uncertainty following the election has heightened concerns among investors regarding Pakistan's ability to secure additional funding, intensifying the risk of default. Shehbaz Sharif, the nominated prime minister, has a track record of successful negotiations with the IMF, having secured a $3 billion loan under the Stand-By Arrangement in June. PAK is currently undergoing a final review under this program, potentially unlocking $1.1 billion in funding by April. The nation faces a $1 billion bond repayment due in April. PAK's history with the IMF includes 23 bailout packages since its independence in 1947, making it one of the most frequent recipients globally.

The International Monetary Fund (IMF) has expressed concerns over Pakistan's external debt repayment capacity, describing it as fragile. According to the IMF, under the Extended Fund Facility (EFF) program, Pakistan's external financing needs are expected to reach $62.6 billion over the next three years. Looking further ahead, these requirements could swell to $110.5 billion over the five-year period from 2024 to 2029. For the current fiscal year, the IMF estimates that Pakistan will require external financing of $18.813 billion. This need is projected to rise, with $23.714 billion anticipated by the 2026-27 fiscal year. Several factors pose significant risks to Pakistan's ability to meet these debt obligations, including high public debt, low foreign reserves, and ongoing sociopolitical instability. Despite these challenges, there is a glimmer of optimism. The IMF projects a noticeable decrease in gross financing needs for fiscal year 2025, which are expected to drop to $18.8 billion. This reduction provides a slightly more hopeful outlook for the country’s economic future. #PakistanEconomy #IMF #DebtRepayment #EconomicOutlook #FinancialChallenges #EconomicStability

Dr. Manzoor Ahmad, in his latest article, explores the critical impact of the IMF’s support on Pakistan’s economic reforms. As IMF Managing Director Kristalina Georgieva recently stated, "Growth is up, inflation is down, and the economy is on a sound path." This development comes with the approval of Pakistan's 25th loan from the IMF, signaling renewed confidence in the nation's economic policies. Dr. Manzoor's analysis provides a deeper understanding of how international financial institutions and local reforms are contributing to Pakistan's economic recovery.

📈 Understanding Pakistan's Domestic Debt: Pakistan's domestic debt has been on the rise, reflecting the government's reliance on internal sources for financing budgetary deficits and development projects. While domestic borrowing provides a quick fix for fiscal gaps, it can lead to long-term challenges such as crowding out private investment, inflationary pressures, and debt-servicing burdens. Read "A Raging Fire" to learn more about Pakistan's #debtcrisis👉🏽 https://lnkd.in/dbk9v5Zf #Pakistan #Economy #Finance #ARagingFire

The Executive Board of the International Monetary Fund (IMF) will convene today in Washington to approve a critical $7 billion loan package for Pakistan, aiming to stabilize the country's fragile economy. This new bailout program, spanning 37 months, marks Pakistan's 24th IMF assistance package. With its approval, Pakistan will also be eligible to receive funds from other international organizations and countries. The expected approval of the loan follows a staff-level agreement reached between Pakistan and the IMF on July 12. Pakistani officials have confirmed that all preconditions for the loan, including securing $2 billion in additional financing and consolidating $12.7 billion in debt, have been fulfilled. China, Saudi Arabia, the UAE, and Kuwait have also provided crucial support by deferring Pakistan’s loan payments for one year. As part of the IMF's preconditions, Pakistan has borrowed from international commercial banks at an interest rate of 11%, one of the highest rates in the country’s history. Also Read: Pakistan needs $100bn in external financing by 2027 amid financial challenges Finance Ministry officials revealed that Pakistan has to repay $100 billion in debt over the next four years. Additionally, loans from friendly countries will need to be rolled over annually, while additional external financing of $5 billion is projected to be required within the next three years. To meet the stringent demands of the IMF program, Pakistan will need to gradually raise its tax-to-GDP ratio by 3% over the same period. Sectors such as retail, wholesale, exports, and agriculture are expected to be brought under the tax net, as the government looks to increase revenues. Finance Ministry officials emphasized that the loan package will not only provide vital funds but will also unlock additional financial assistance from other international organizations and countries. This assistance is expected to help Pakistan mitigate the ongoing economic crisis and implement necessary reforms for long-term stability. #IMF #board #meet #approve #loan #Pakistan #247newsupdate