Though much isn’t going in favour of the country, some respite can be expected due to a favourable debt profile. The presence of high external debt increases a country’s vulnerability to exchange rate shocks and relying primarily on bond market makes access to finance even more difficult. In Pakistan’s case both factors play a relatively lesser role in the national finances compared to some other low-medium income countries.
The current situation can be better understood if we look at the country’s financing requirement and the likely avenues of inflow.
“We have estimated FY23 financing gap of USD 5.3bn. We have mainly assumed that Pakistan will remain committed to the IMF program, all multilateral flows apart from conditional RISE II and PACE loan will materialize, and bilateral deposits will be rolled over. On commercial side, we have only assumed that USD 3.3bn loans pertaining to China will be rolled over. Due to Pakistan’s poor sovereign debt rating and global macroeconomic issues, we have assumed zero inflows from Eurobonds, ” read a report by Ismail Iqbal Securities.
| Funding Source - USD Millions | Expected |
| Multilateral | 6,275 |
| Rollover Deposits | 9,000 |
| Commercial | 3,500 |
| Bilateral | 1,040 |
| Bonds | 0 |
| Naya Pakistan Certificates | 334 |
| IMF | 3,760 |
| FDI | 1,500 |
| Total | 25,409 |
| Requirement | |
| Debt Repayment | 23,000 |
| CAD | 7,648 |
| Total | 30,648 |
| Funding Gap | 5,239 |
| Expected Financing | |
| China-Swap | 1,450 |
| KSA | 3,000 |
| Deferred Oil | 600 |
| Total | 5,050 |
Source: Ismail Iqbal Securities
As per the table above, Pakistan is likely to generate around $25 billion of inflows primarily from multilateral, bilateral, commercial, and institutional lenders. While investment in Naya Pakistan Certificates and Foreign Direct Investments would also contribute to the inflows.
However, the outflows comprising of $23 billion in debt repayment and $7 billion in current account deficit would exceed the anticipated inflows. This leaves the country with a $5 billion financing gap.
“In our view, Pakistan is likely to finance this gap through USD 3bn deposit from Saudi Arabia, USD 600mn from additional Saudi oil facility and USD 1.45bn Chinese swap facility,” the report added further.
However, the requirements for the next three months are even lesser. “Between Jan-Mar 2023, $8 billion in repayments are due out of which, around 50 percent is expected to be rolled over. This means the country requires about $3-4 billion for repayments immediately. These amounts are arranged for, but contingent on the revival of the IMF programme. If it resumes, the crisis could be averted for the time being,” said Dr. Farrukh Saleem, a senior journalist and analyst, during an interview.
Further, the Bloomberg Economics report also suggested that the fresh inflows from pledges at Geneva and further rollovers in the upcoming fiscal year could help the country see through till March 2024. However, Pakistan’s 10-year bond issued in 2014 is maturing with a repayment of $1 billion and country would need to arrange funds from other avenues to meet the obligation.