Finance Minister Muhammad Aurangzeb is still cagy about how much Pakistan will ask for
Finance Minister Muhammad Aurangzeb has met IMF MD Kristalina Georgieva in Washington, but while he has repeatedly said that Pakistan will ask for another IMF programme to succeed the current Stand-By Arrangement, he has not put a figure on the next loan that Pakistan will ask for. However, the Extended Fund Facility Pakistan will probably ask for is expected to be around $6 billion. However, Mr Aurangzeb did give a timeframe for the negotiations between the Finance Ministry and an IMF team mid-May. This indicates that the process is on schedule, but is not being fast-tracked.
Though no details have been shared, it was inevitable for the two to have at least engaged in loud thinking about the conditionalities the IMF might wish to attach to its loan. Both Mr Aurangzeb and Ms Geoergieve have indicated the direction in which they thought the Pakistan economy should move: more reform. The IMF must be pleased to have found a government with which it shares so much agreement on the way ahead. Mr Aurangzeb said that the rollover of much bilateral debt had left Pakistan in good shape in that direction, but he did note that Pakistan had to make payments of about Rs 25 billion a year to service its debt. A fresh IMF loan may indicate good orthodox economic management, but it does not show a path towards the retirement of that debt. It certainly does not indicate the kind of out-of-the-box thinking that will lead to any kind of debt retirement.
At the moment, Mr Aurangzeb indicated that Pakistan might not make a fresh bond issue to replace the one of $1 billion paid off earlier in the month. He said that he was busy talking to rating agencies. It is worth mentioning that Fitch had downgraded Pakistan to CCC- from CCC+ in February, which was when Moody’s maintained its rating of CAA-3. Obviously, Mr Aurangzeb hopes that the positive news of some economic indicators, combined with the IMF package, will allow an improvement in the Pakistan sovereign bond’s rating, which will in turn means that Pakistan will be able to borrow relatively cheaply, which explains why he said any international capital markets issuance would be in 2025-2026. It is to be hoped that the government will manage to control its apparently insatiable hunger for foreign exchange till then.
