ISLAMABAD: Terming Pakistan’s external debt repayment capacity as fragile, IMF has assessed Islamabad’s external financing needs have ballooned to $62.6 billion over three years period under the Extended Fund Facility (EFF) programme.

The external financing needs will go up to $110.5 billion if calculated for five years from 2024-25 to 2028-29.

According to the IMF staff report, Pakistan will have external financing needs of $18.813 billion in the current fiscal year, $20.088 billion in 2025-26 and $23.714 billion in 2026-27.

The IMF data shows financing needs would not witness any reduction even after completion of three-year programme. It would be standing at $24.625 billion in 2027-28 and $23.235 billion in fiscal year 2028-29.

“Pakistan’s capacity to repay is subject to significant risks and remains critically dependent on policy implementation and timely external financing,” the IMF warned. The Fund’s exposure would reach Special Drawing Rights (SDR) 6,816 million by September 2024 (336pc of quota) with purchases linked to the request.

With the completion of all purchases under the arrangement, the Fund’s exposure would peak in September 2027 at SDR 8,774 million (432pc of quota; approximately 55pc of projected gross reserves for FY27) around double the average for recent EFFs.

“Exceptionally high risks — notably from high public debt and gross financing needs, low gross reserves and sociopolitical factors — could jeopardise policy implementation and erode repayment capacity and debt sustainability,” it further said.

Restoring fiscal and external viability is critical to ensure Pakistan’s capacity to repay the Fund. This hinges on strong and sustained policy implementation, including, but not limited to fiscal consolidation and external asset accumulation, as well as decisive reforms to enable stronger and more resilient economic development.

On external financing, IMF says multilateral disbursements are projected to reach $14 billion over FY25-28 (including $7.1 billion from World Bank and $5.6 billion from Asian Development Bank) with key bilateral creditors fully maintaining their exposure through new financing activities. Modest access to new short-term borrowing from commercial banks is anticipated for FY25-FY26, with a gradual return to bond markets assumed for mid-FY27, reflecting a restoration of policy credibility.

The IMF sponsored programme is fully financed, with firm commitments for the first 12 months and good prospects thereafter. Financing committed for FY25 includes $16.8 billion of rollovers of existing short-term financing and $2.5 billion of additional commitments, including from China, Saudi Arabia, ADB and IsDB.

The Pak authorities have received firm commitments from key bilateral partners to (at least) maintain their existing exposures throughout the programme, including rolling over existing short-term liabilities, which will contribute to meeting financing needs in the remaining period.

Loans from foreign commercial banks totaling $6.6 billion, which were renewed during the 2019 EFF and 2023 SBA, are also expected to continue to be rolled during the new programme. These together with commitments from multilateral institutions provide necessary financing assurances.

Nonetheless, financing risks remain high and continued monitoring will be needed to ensure timely and adequate financing during programme reviews.

According to brokerage Topline Securities chief Mohammad Sohail, Pakistan gross financing requirement for FY25 is $18.8bn, which is a nine-year low according to IMF data. Average gross financing requirement over last nine years has remained $25bn. This is contrary to common perception that Pakistan has to pay a record high amount in next few years.

“Significant fall in gross financing requirement for FY25 is on the back of contained current account deficit of $3.6bn and relatively lower repayments in FY25 to the tune of $15.2bn. Similarly, over next 3 years (FY25-28), IMF has lowered gross requirement of Pakistan by cumulative US$4.2bn and over next 2 years by US$5.2bn due to anticipated fall in current account deficit.”