In a significant setback for Pakistan’s financial stability, the government was unable to secure $9 billion in anticipated debt rollovers last month, managing to obtain only $426 million from international lenders in July.
The Ministry of Economic Affairs released its monthly disbursement report on Tuesday, highlighting the financial challenges the country faces. The report confirmed that no loans were secured from foreign commercial banks or bilateral creditors, sources the government is urgently seeking to tap for critical foreign funding. These rollovers, particularly from China, Saudi Arabia, and the United Arab Emirates, are essential prerequisites for the International Monetary Fund’s (IMF) approval of a $7 billion bailout package.
The Ministry’s report detailed the government’s plan to roll over $5 billion in Saudi debt and $4 billion in Chinese debt. Additionally, a $3 billion UAE deposit is listed on the central bank’s balance sheet. However, the report noted that no disbursements were made against these loans last month, marking the first official acknowledgment of the failure to secure these critical funds.
The IMF had originally scheduled the approval of the $7 billion program for August 30, but the decision was deferred due to the government’s inability to finalize the necessary rollovers. The IMF’s new Extended Fund Facility (EFF) assumes that Pakistan will remain current on its external and domestic debt repayments. The $12 billion cash deposit rollover and $4 billion commercial loan are integral to the IMF’s debt sustainability plans. Despite this, both the IMF and the Pakistani government have remained silent on the need for debt restructuring.
Sources suggest that if Pakistan and Saudi Arabia can finalize the sale of a 15% stake in the Reko-Diq mining project by early September, Saudi Arabia might expedite Pakistan’s $5 billion rollover request and also approve an additional $1.2 billion oil financing facility. However, this facility has not been included in the government’s annual borrowing plan of $19.2 billion for the current fiscal year.
Finance Minister Muhammad Aurangzeb has already made a formal request for the $1.2 billion facility to Saudi Finance Minister Muhammad Al-Jadaan. Last week, the finance minister indicated that the IMF might approve the new package in September, though he did not specify a date.
Any further delay in the $7 billion IMF deal approval could further complicate the situation for the federal government. Despite imposing a record Rs1.8 trillion in new taxes, the government now faces an expected shortfall in Federal Board of Revenue (FBR) tax collection.
If the IMF approval is delayed until October, the lender may demand a mini-budget to cover any tax collection shortfalls before approving the loan package. The government has set a Rs898 billion tax collection target for the FBR this month. However, as of Tuesday, the FBR has collected only Rs575 billion, leaving Rs323 billion to be collected in just four days—an average of Rs81 billion per day.
Internal assessments by the FBR suggest a possible shortfall of around Rs80 billion, which the FBR is now attempting to cover by taking advances from commercial banks. Prime Minister Shehbaz Sharif has recently appointed Rashid Langrial as the new FBR chairman, who now faces his first major test in meeting these targets and fulfilling the expectations of the PM’s Office.
The Ministry of Economic Affairs report also highlighted that the World Bank provided a $132.4 million loan last month, with $11 million allocated to the National Transmission and Dispatch Company (NTDC), $80 million for two flood-related projects in Sindh, and $26 million for a Punjab agriculture project.
The Asian Development Bank (ADB) disbursed $52 million for various schemes, while China provided $97 million for the Pakistan Multi-Mission Satellite project. Additionally, the country received $128 million from the Naya Pakistan Certificates, which come at a high cost. However, there were no disbursements against the annual projected budget estimates of $3.8 billion from foreign commercial banks.
Pakistan also plans to borrow $1 billion through sovereign bonds this fiscal year, including $300 million through Chinese Panda bonds and $700 million through Green bonds.
