Pakistan's economic endurance hinges on China's assistance despite IMF loan: Report

Islamabad: Pakistan is set to meet a dozen conditions in six months to stay in the $6 billion IMF programme, but the cash-strapped country's economic endurance still hinges on a $11 billion lifeline from China, according to a media report on Friday.

The Washington-based international lender on Thursday released its staff level report of the $6 billion programme, confirming that the government was in process of increasing electricity prices by Rs 5.65 per unit or 36 per cent from now till October, The Express Tribune newspaper reported.

This increase will put an additional burden of Rs 884 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 conditions set by the International Monetary Fund, the report said.

Additionally, the government will slap new taxes equal to 1.1 per cent of GDP or around Rs 600 billion in June as part of the IMF condition, it said. These conditions are among 11 actions that the government will take by September this year.

They are in addition to the five prior actions that the government took to convince the IMF board to approve its case.

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 continued support from its all-weather ally, China.

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 G-20'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. The finance ministry told the IMF that key bilateral creditors had maintained their exposure to Pakistan in line with programme financing commitments.

However, Saudi Arabia has already withdrawn the $3 billion it had committed.