Pakistan still need to meet 12 more conditions in six months in order to the $6 billion International Monetary Fund (IMF) programme while its sustenance rests on an $11 billion continued Chinese lifeline.
IMF released its staff level report of the $6 billion programme, on Thursday, validating that the government was in process of increasing electricity prices by Rs5.65 per unit or 36% from now till October.
The increase in tariff will put an additional burden of Rs884 billion on the consumers by June 2023, according to the circular debt management plan, which the cabinet approved last month as part of the actions to meet the IMF conditions.
In addition to that, the IMF report says the government will introduce new taxes equal to 1.1% of GDP or around Rs600 billion in June as part of the IMF condition
These conditions are among 11 actions that the government will take by September this year.
These are in addition to the five prior actions that the government took to convince the IMF board to approve its case.
They included the introduction of the Rs140-billion mini-budget, an increase in electricity prices by Rs4.97 per unit from December 2020 to January 2021 on account of quarterly and annual tariffs, introduction of amendments to the SBP Act and the approval of the circular debt management plan by the cabinet.
The government is implementing these actions to remain in the $6 billion IMF programme but at the same time, the report shows that Pakistan’s external financing needs are still largely met by Chinese continued support.
The country’s gross external financing needs — the funds that it needs to pay off foreign loans and finance its imports — amount to $27 billion over the next 12 months, according to the IMF.
These financing needs will be met by support from China’s $10.8 billion, the UAE’s $2 billion, the World Bank’s $2.8 billion, the G20’s $1.8 billion initiative, the Asian Development Bank’s $1.1 billion, and the Islamic Development Bank’s $1 billion, Pakistan informed the IMF.
However, Saudi Arabia has already withdrawn the $3 billion it had committed.
“China has maintained its exposure by renewing and augmenting the CYN 30 billion, (about US$4.6 billion) three-year bilateral currency swap”, the IMF report confirmed.
China had increased the size of bilateral currency swap from $3 billion to $4.5 billion to help Pakistan pay off Saudi loans.
The IMF report further read that China had renewed the maturing commercial loans as part of the programme financing assurance commitment.
China rolled over $2.5 billion commercial loans in this fiscal year and also plans to extend $4.4 billion in the next fiscal year.
The IMF report stated that China had also provided an additional $1 billion deposit in July 2020, raising the State Administration of Foreign Exchange (SAFE) deposits to $4 billion.
China’s continued financial support is “absolutely very critical for Pakistan”, Ernesto Rigo, the IMF’s Washington-based mission chief, said on Thursday while responding to a question.