State Bank of Pakistan (SBP) Governor Jameel Ahmad has announced that Pakistan intends to raise up to $4 billion from Middle Eastern commercial banks during the next fiscal year. This move is part of the government’s efforts to address external financing gaps. The optimism behind this initiative arises from Pakistan’s ongoing efforts to roll over $12 billion in loans from key allies, including China, Saudi Arabia, and the United Arab Emirates (UAE).
In addition to seeking funds from Middle Eastern banks, Pakistan is in the “advanced stages” of securing an additional $2 billion in external financing. This funding is crucial for the International Monetary Fund’s (IMF) approval of a $7 billion bailout program. The government has also requested an extra $1.2 billion loan from Saudi Arabia to bridge a $2 billion financing gap.
While Pakistan and the IMF reached an agreement on the loan program in July, the country’s inclusion in the IMF agenda is pending until September 4, 2024. The IMF’s executive board requires timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.
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Regarding monetary policy, Governor Ahmad highlighted the positive impact of recent interest rate cuts in Pakistan. Despite these cuts, inflation has continued to slow down, and the current account remains under control. In July, Pakistan’s annual consumer price index inflation stood at 11.1%, a significant decrease from the highs of over 30% observed in 2023.
The Monetary Policy Committee will carefully review these developments, emphasizing that future rate decisions cannot be pre-determined. The central bank has already reduced rates from a historic high of 22% to 19.5% in two consecutive meetings. Another monetary policy review is scheduled for September 12, with a renewed focus on fostering growth and addressing related socioeconomic issues.
