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Pakistan aims to agree outline of new IMF loan in May

Pakistan Finance Minister Muhammad Aurangzeb at the IMF and World Bank’s 2024 annual Spring Meetings.
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Pakistan hopes to agree on the contours of a new International Monetary Fund (IMF) loan in May, Finance Minister Muhammad Aurangzeb told Reuters and has kicked off talks with ratings agencies to lay the groundwork for a return to international debt markets.

The country’s current $3 billion arrangement with the fund runs out in late April and the government is seeking a longer and bigger loan to help bring permanence to macroeconomic stability as well as an umbrella under which the country can execute much-needed structural reforms, the minister said.

“We expect the IMF mission to be in Islamabad around the middle of May – and that is when some of these contours will start developing,” said Aurangzeb, who met with the Fund’s Managing Director Kristalina Georgieva on Wednesday during the International Monetary Fund and World Bank Spring Meetings.

He declined to outline what size programme the government hoped to secure, though Pakistan is expected to seek at least $6 billion. Aurangzeb added that once the IMF loan was agreed, Pakistan would also request additional financing from the Fund under the Resilience and Sustainability Trust.

The struggling South Asian nation had managed to accumulate foreign exchange reserves in recent months and was on track for its war chest to hit $10 billion – or roughly two months import cover – by end-June.

The debt situation also looked more benign, Aurangzeb said.

“The bulk of our bilateral debt – including our China debt -is being rolled over, so in that sense I think we are in good shape and I don’t see a big issue during this fiscal year nor next fiscal year, cause we need to repay roughly $25 billion dollars every fiscal year.”

Pakistan also hopes to come back to international capital markets, possibly with a green bond. However, there was some more work to be done before that happens, said Aurangzeb.

“We have to come back into a certain ratings environment,” he said, having kicked off talks with ratings agencies, adding the government was hoping to get an improvement in its sovereign rating in the next fiscal year.

“In all likelihood, any international capital markets issuance will likely be in the 2025/2026 fiscal year.”

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