Pakistan shut out of bond markets – USD6 billion bailout from IMF is the only resort

Finance Minister says IMF loan is the only option to save the economy

Pakistan shut out of bond markets - USD6 billion bailout from IMF is the only resort

Pakistan shut out of bond markets - USD6 billion bailout from IMF is the only resort

Pakistan Finance Minister Miftah Ismail said that the Pakistani government is unable to secure funding from commercial banks and the global bond market, making it imperative to sign an agreement with the International Monetary Fund (IMF).

The Pakistani government raised fuel prices, which was a key benchmark in order for the IMF to resume its loan program. The move also caused Pakistan’s dollar bonds, which had reached a record low, to gain last Friday. The government is aiming to secure a staff-level agreement with the IMF by June, according to sources familiar with the matter.

The USD6 billion bailout program for the country had been stalled after former Prime Minister Imran Khan had reduced and frozen fuel prices. Shehbaz Sharif, Khan’s successor, banned the import of luxury goods, and the Pakistan Central Bank raised borrowing rates more than expected, in a move to counter record high import levels.

In a statement, Ismail said that Pakistan required between USD36 billion and USD37 billion in funding for the fiscal year starting June. A deal from the IMF for the troubled nation would help it secure funding from other sources such as the World Bank, and friendly nations such as China.

Pakistan shut off from global bond market

Pakistan’s Finance Minister Ismail also eliminated raising funds from the global bond market, and also from commercial banks that had provided the country with short-term loans in the past. The decision was made after the country had selected banks like JP Morgan Chase & Co, Citigroup Inc., Credit Suisse Group AG, and Standard Chartered Plc to manage any bond sales.

The financing from the IMF will enable the country to bolster its foreign exchange reserves to approximately USD15 billion next fiscal, from approximately USD10 billion currently. This year, Pakistan faces USD3.2 billion in dollar debt, which is the highest amount in a decade.

Acting Central Bank Governor Murtaza Syed told analysts and investors that the nation’s financing requirements will be comfortable once it secures the IMF loan program.

Saudi Arabia has agreed to provide the country with a considerable bail-out package of around USD 8 billion to help the cash-starved country shore up dwindling forex reserves and revive its troubled economy.

Pakistan secured the deal when Prime Minister Shehbaz Sharif visited Saudi Arabia. The financial package includes doubling of the oil financing facility, additional money either through deposits or Sukuks and rolling over of the existing USD 4.2 billion facilities.


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