After painstaking negotiations, the IMF has agreed to a 9-month rescue program for Pakistan worth $3 billion, aimed at addressing the country's pressing financial challenges. This agreement comes as Pakistan's Central Bank Governor, Jamil Ahmed, revealed plans to secure an additional $4 billion from commercial banks in the Middle East to fill external financing gaps as the nation navigates its economic recovery.
In his first extensive interview since taking office in 2022, Ahmed highlighted that Pakistan is in the advanced stages of securing $2 billion in external financing, a prerequisite for the IMF's approval of a larger $7 billion rescue program. Although an agreement was reached in July, it awaits confirmation from the IMF's Executive Board and necessary financing guarantees from various partners.
The Central Bank estimates that Pakistan's total financing needs for the coming years will be less than 5.5% of its GDP, based on revised projections that reflect a declining current account deficit. Ahmed expressed confidence in meeting these financing needs and emphasized the importance of fiscal discipline, particularly in light of recent interest rate cuts that have helped control inflation.
Despite concerns about potential government borrowing due to lower interest rates, Ahmed reassured that the government is committed to consolidating public finances. He acknowledged the challenges faced over the past year, including a balance of payments crisis that left the Central Bank with reserves sufficient for only one month of imports. However, he noted that the situation has improved, allowing the bank to shift focus towards growth and financial inclusion.
