KARACHI – Despite of financial assistance package worth $15 billion fromSaudi Arabia and UAE, Pakistan may still need IMF bailout package, it hasbeen revealed.
Saudi Arabia’s rescue package and financial support commitment from Chinado not obviate the need for Pakistan’s entry into International MonetaryFund (IMF) loan program due to size of the funding gap, a brokerage said onFriday.
So far the government has received commitment of $9 billion – $6 billionfrom Saudi Arab and $3 billion from UAE – which can grow to $13 to 15billion.
“Despite drop in current account deficit, we reckon the size of the deficitremains high for two reasons: current FX (foreign exchange) reservessituation and impending repayments, more skewed towards 2HFY19,” BMACapital said in a report.
“Given the funding gap of $8 10 billion, the government will also need tobuild up foreign exchange reserves by issuing Euro/overseas bonds andseeking support from friendly countries.”
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The brokerage said the uncertainty about entry in a fresh IMF programexacerbated the situation.
“We reckon the government’s much-awaited decision to seek IMF assistance isa step in the right direction and accordingly set the stage for amuch-needed repair of Pakistan’s external account,” it added.
“We are optimistic on Pakistan meeting preconditions and expect tangibleprogress by mid-January 2019.” Current account deficit (CAD) is expected todrop to $13.5 billion in FY2019 and $8.5 billion in FY2020. The estimatedoes not include deferred oil facility of $3 billion as agreed with SaudiArabia.
