Country needs $12bn to avert run on forex

[Jango]

Where is ISPR ? Dear ISPR please enlighten us with todays exchange rate and foreign reserves

That really was one of the most brain dead moments by an ISPR DG in recent times.

 

[Two banks of the River]

ISLAMABAD: In order to bridge the financing gap, Pakistan requires dollar inflows of $9 to $12 billion in the shape of rollover and fresh loans from bilateral donors and commercial banks for avoiding further depletion of foreign currency reserves during the current fiscal year.

The dollars are running away at the moment and Islamabad immediately needs a dollar injection as a stop-gap arrangement to get a breathing space. Without the support of bilateral partners and seeking more loans from commercial banks, this gap cannot be fulfilled on a short-term basis.

The revival of the IMF will only be possible till the end June 2022 if everything goes well between the two sides. So, Pakistan and the IMF will have to strike a staff-level agreement after holding talks in mid May and then the Fund’s Executive Board requires 4 to 6 weeks period to get approval on next tranche of $960 million under $6 billion Extended Fund Facility (EFF).

Pakistan has sought nine- month extension into EFF with an increase in size of program by $2 billion for jacking up total funding of $8 billion. The IMF program was going to expire in September 2022 but with request of extension now it would be matured in June 2023.

“Pakistan will have muster up dollar inflows of $9 to $12 billion depending upon level of current account deficit in remaining months so the government will have to ensure rollover of commercial loans and deposits from China, seeking more generous package from Saudi Arabia and securing commercial loans from consortium of banks in remaining period of the current fiscal year” top official sources confirmed while talking to The News here on Monday.

The official conceded that Islamabad will have to pay back external debt servicing to the tune of $3 billion in last ongoing quarter (April-June) period of the current fiscal year. The current account deficit stood at $13.2 billion in first nine months (July-March) period of the current fiscal year and it is projected that it might touch $18 to $20 billion till end June 2022. Keeping in view the conservative estimates, the current account deficit might touch $16 to $17 billion till end of the current fiscal year. However, some independent economists suggest that it might touch $18 to $20 billion for the current fiscal year.

On the basis of both these projections on CAD, it is estimated that the country requires $9 to $12 billion financing in remaining period of the current fiscal year. Pakistan is awaiting to get $2.4 billion loan rollover from China and all procedural requirement are completed. Ministry of Finance high-ups expect that it will be done in May 2022. China’s $2 billion deposits are also required rollover as $1 billion would be due in May and second $1 billion in July 2022. In totality, Pakistan requires $4.3 billion rollover from China in next four months.

Secondly, Prime Minister Shehbaz Sharif will be visiting Saudi Arabia this week and Ministry of Finance has worked out proposal for seeking extension in deposits of $3 billion in line with extension into IMF programme, seeking fresh deposits and utilization of oil facility on deferred payments.

This scribe contacted to UK based Pakistani economist Yousuf Nazar for seeking his comments, he replied that he argued for the withdrawal of subsidies to big businesses to the tune of Rs 800 billion, an increase in the tax rate on banks to 40%, sweeping deregulation of commodity trade and renegotiation of IPP to lower return. We need a comprehensive approach during technical talks with IMF in May, he concluded.

Country needs $12bn to avert run on forex

ISLAMABAD: In order to bridge the financing gap, Pakistan requires dollar inflows of $9 to $12 billion in the shape of rollover and fresh loans from bilateral donors and commercial banks for...

www.thenews.com.pk

The top leadership is going to Saudia. So things should be fine.

There is only one problem, the reduction of subsidies, IMF will want the roll back of subsidies announced by Imran Khan before the IMF program is continued again.

But the present government is on borrowed time. Any unpopular move will cause a lot of damage to them in coming elections.

 

[The Accountant]

That really was one of the most brain dead moments by an ISPR DG in recent times.

Yes ... On the one hand they are claiming to be neutral on the other hand they r trying to show the economic indicators of change in government ...

 

[Wikki019]

China has invested to much into Pakistan at this point that it cannot afford not to. China's own strategic self interest is at stake.

No one can argue with this man, he is living in his own lalaland

 

[TNT]

The overseas should stop their remittances. I say let the country become bankrupt. Its the only way these traitor leeches might leave Pakistan for good. If the conditions become unlivable then these elite traitors in military, judiciary, politicians and bureaucracy may run away. We can then start fresh.

 

[Ssan]

Pakistan has needed more $$$ in the last three years than what they need now at 12 bn

 

[Jungibaaz]

this gap will increase if remittance or investment in roshan digital account, decreases?

Yes, but it has to be said that a lot of us send money home because it’s needed, or for physical investment purposes, that won’t stop. Also, I think the current mutant coalition might actually find it easier to secure concessions from the IMF and also easier support from the likes of Saudi.

It’s all a balancing act and there’s no easy way. Imran inherited a crisis on day one and he had no choice but watch rising inflation and to keep a tight lid on deficits which caps growth. The opposition of the time blamed him for this (wrongly IMO), now it’s Imran’s turn to hit back at them on inflation and policies, and this time they have no choice either. Basically nobody wins and nothing changes, parties take turns - one screws the middle class while the other lies to them about whose fault it is.

Until structural reforms are forced, and elite capture of politics is dialled back, we’ll continue like this for quite some time. No real change in the last 20 years and no change due on the horizon I think.

 

[AZ1]

Yes, but it has to be said that a lot of us send money home because it’s needed, or for physical investment purposes, that won’t stop. Also, I think the current mutant coalition might actually find it easier to secure concessions from the IMF and also easier support from the likes of Saudi.

It’s all a balancing act and there’s no easy way. Imran inherited a crisis on day one and he had no choice but watch rising inflation and to keep a tight lid on deficits which caps growth. The opposition of the time blamed him for this (wrongly IMO), now it’s Imran’s turn to hit back at them on inflation and policies, and this time they have no choice either. Basically nobody wins and nothing changes, parties take turns - one screws the middle class while the other lies to them about whose fault it is.

Until structural reforms are forced, and elite capture of politics is dialled back, we’ll continue like this for quite some time. No real change in the last 20 years and no change due on the horizon I think.

They wouldnt stop remittance because of their family may be but they can stop investment in roshan digital account, many already close their account so yes gap is coming in remittances back to $23 billion from $29 billion shortage of $billions

 

[Jungibaaz]

They wouldnt stop remittance because of their family may be but they can stop investment in roshan digital account, many already close their account so yes gap is coming in remittances back to $23 billion from $29 billion shortage of $billions

Agree, Roshan digital accounts will see a lot of outflows because overseas don’t trust the old guard the way they trust IK. But the accounts were a good idea, IMO the current lot should continue the policy and continue to give assurances for it. How liquid are the funds though? Can one withdraw everything over a short period?

Politicians might be petty, but they have shown in the past the ability to carry on good policies (with some petty rebranding to steal credit). PPP brought Benazir Income Support - a good policy, both PML and PTI continued it and even expanded funding. The last government has a few good initiatives that should be continued whatever, among these prime in my mind are Sehat card (best policy of the PTI government IMO) and also initiatives like Roshan Account. They’d be stupid to jeopardise these.

 

[AZ1]

Agree, Roshan digital accounts will see a lot of outflows because overseas don’t trust the old guard the way they trust IK. But the accounts were a good idea, IMO the current lot should continue the policy and continue to give assurances for it. How liquid are the funds though? Can one withdraw everything over a short period?

Politicians might be petty, but they have shown in the past the ability to carry on good policies (with some petty rebranding to steal credit). PPP brought Benazir Income Support - a good policy, both PML and PTI continued it and even expanded funding. The last government has a few good initiatives that should be continued whatever, among these prime in my mind are Sehat card (best policy of the PTI government IMO) and also initiatives like Roshan Account. They’d be stupid to jeopardise these.

they are giving assurance, advertising etc about roshan digital account but people first hating these mix achaar and then trust issue playing in this.

So overseas pakistanis can do alot here to make them correct the mistake lol

 

[Whirling_dervesh]

Saudi and China will roll over loans. IMF will lend $5 billion as per agreement. Remittances will not drop because they are primarily meant to fund families at home.

So no big deal

Yeah no big deal...slaves will remain slaves

 

[Patriot forever]

Yes, but it has to be said that a lot of us send money home because it’s needed, or for physical investment purposes, that won’t stop. Also, I think the current mutant coalition might actually find it easier to secure concessions from the IMF and also easier support from the likes of Saudi.

It’s all a balancing act and there’s no easy way. Imran inherited a crisis on day one and he had no choice but watch rising inflation and to keep a tight lid on deficits which caps growth. The opposition of the time blamed him for this (wrongly IMO), now it’s Imran’s turn to hit back at them on inflation and policies, and this time they have no choice either. Basically nobody wins and nothing changes, parties take turns - one screws the middle class while the other lies to them about whose fault it is.

Until structural reforms are forced, and elite capture of politics is dialled back, we’ll continue like this for quite some time. No real change in the last 20 years and no change due on the horizon I think.

In 2013 when plmn took over Pakistan financial requirements were just a few billion dollars ( 1/3 of what was required in 2018).

What happened between 2013-18 is the stagnation of inflows coupled with massive increase in outflows due to flawed policy of currency manipulation and consumption driven growth.

In the last 3-4 years of PTI government the external financial requirements has been very much consistent around $16-18b / annum. The OP failed to highlight that Pakistan has been dealing with such a situation and managing it every year for the last 3-4 years under PTI.

Even while facing such odds pti government managed to increase inflows more than what was done in a decade.

PTI in its final days has already secured $2.5b rollover from the Chinese. Moreover they were managing the extreme global commodity inflationary cycle aswell with CAD just 0.5b in Feb and 1b in March. The exports of goods crossed $3b in March coupled with the $2.8+ in Remittances and the highest export of services aswell. ( Record IT exports of 260m+, which is well on way to achieve 3b in the current Financial year 3x that of 2018).
LSM growth of 7.8% ( PBS data) in the first 8 months of current FY. ( July-Feb)
All this while achieving GDP growth of 5-6% in the first 9m ( based on solid MEI figures released every month).

There aren't many economic discussions on the forum due to the current coup in the country but its a blood bath out there with kibor hitting 14.9% (highest since 1998) , couple that with the heavy borrowing underway its a disaster of epic proportion in the making.

 

[PakFactor]

Agree, Roshan digital accounts will see a lot of outflows because overseas don’t trust the old guard the way they trust IK. But the accounts were a good idea, IMO the current lot should continue the policy and continue to give assurances for it. How liquid are the funds though? Can one withdraw everything over a short period?

Politicians might be petty, but they have shown in the past the ability to carry on good policies (with some petty rebranding to steal credit). PPP brought Benazir Income Support - a good policy, both PML and PTI continued it and even expanded funding. The last government has a few good initiatives that should be continued whatever, among these prime in my mind are Sehat card (best policy of the PTI government IMO) and also initiatives like Roshan Account. They’d be stupid to jeopardise these.

Currently the Roshan Digital Account is pretty liquid when withdrawing funds out back into the states ---

How long that's to be seen, because remember with Punjab Bank went bust few decades back due to depositor funds being raided and siphoned of by these politicians, SBP (State Bank of Pakistan) came in and made the depositors whole again -- again public funds was used and no body was prosecuted for this, but many people were still left penniless after losing everything they had.

 

[Wood]

Yeah no big deal...slaves will remain slaves

Developing countries have large fuel imports that tend to not rack up with productive output. This is a common root cause that leads to debt. A lot of people here say that this can be avoided, but they are not giving a practical solutions