Pakistan's Plan B for economic crisis seeks $3-4bn from friendly countries

Pakistan has come up with a much-hyped Plan B as it has been left with no option but to make a request to its bilateral partners for additional deposits of $3 billion, as per a Pakistan-based newspaper. This comes amid the nation's continued deadlock with the International Monetary Fund (IMF) till the end of June 2023.

While talking about the current economic scenario, Pakistan's Finance Minister Ishaq Dar said that Islamabad had to repay $3.7 billion as predicted by an international rating agency and that all repayments would be done well on time. 

IMF and Pakistan's Plan B

The Q Block (Ministry of Finance) has been looking at all available options to get financing from the bilateral friends to avert the looming crisis on its external accounts in case the ninth review is not completed. As the expiry date of this review is on June 30, 2023, both sides, the IMF and Pakistan, had gone public with their apprehensions despite showing their commitment to remain engaged for the completion of the ninth review under the $6.5 billion Extended Fund Facility (EFF) program.

“With the provision of bridging financing gap of $3-$4 billion from bilateral friends, Pakistan can manage its financing needs," said top official sources explaining the "Plan-B". Further, he added, this arrangement is under active consideration and will be implemented to avoid the danger of default in the next few months till the end of October or November 2023.

In this Plan B for the economic crisis, Pakistan has been hoping that friendly countries like Saudi Arabia and the United Arab Emirates (UAE) have linked their additional deposits of $2 billion and $1 billion respectively with the signing of the staff-level agreement and revival of the IMF programme. 

Will this new plan help Pakistan from coming out of debt?

While sharing details about the plan B for the economic debt of Pakistan, one of the officials said: “This arrangement is in our minds and we will request additional deposits of $3 billion from our bilateral friends and hope it will be done. If it is materialised, then it will help Islamabad pass the next few months without fear of default.” 

In the meantime, Finance Minister Ishaq Dar stated that China would be granted a rollover of $1 billion and $300 million commercial loan re-financing within the ongoing month, so $2.3 billion would not deplete from the foreign exchange reserves by the end of June 2023. 

How Pakistan plans to deal with the economic crisis?

Two Chinese banks have agreed not to charge anything as a penalty, as per Ishaq Dar. Earlier, China refinanced $1 billion from the China Development Bank and it was the fastest execution. Pakistan has also paid off $300 million in commercial loans and has been hoping this would be refinanced within the next four to five days. 

All procedures have been completed, said Ishaq Dar. While sharing information on the status of Shell Pakistan, the minister added that the company would go to sell its share to an international investor, so their business activities would not close down in the country. "There is nothing to worry about, this news is not new for the government," said Pakistan's Finance Minister.