ISLAMABAD (Dunya News/Web Desk) – As talks are progress between the visiting International Monetary Fund (IMF) mission and Pakistan, the government economic team has given an initial estimate of external financing of around $22 billion, sources say.
At the same time, Islamabad has shared a power tariff rationalisation plan for industrial sector with the IMF, meant to boost much-needed domestic production and exports by giving a package to the related industries.
When it comes to external financing, issuance of sukuk bonds worth $1.5bn during the next fiscal year 2024-25 is part of the plan.
On the other hand, Pakistan is also hopeful of friendly nations extending loan rollover of around $12bn, the sources say, as the cash-starved country badly needs external financing to meet its financial obligations.
Read more: Talks start to secure IMF programme, agreement reached on budget targets
Pakistan requires to ensure debt repayments as per schedule which includes not only the principal amount but also interest payments.
At the same time, the bonds issued by Pakistan repeatedly during the past years have been attractive only because of the high interest rates, which thus worsens the debt repayments challenge for the country.
PAKISTAN PANDA BONDS
Meanwhile, panda bonds – which are denominated in Chinese yuan but issued by foreign borrowers, including companies, multilateral agencies and governments – are also part of this plan.
Finance Minister Muhammad Aurangzeb had stated earlier in March that Pakistan was keen to tap Chinese investors by selling as much as $300 million in panda bonds for the first time ever.
He had told Bloomberg in an interview that selling yuan-denominated debt would allow Pakistan to diversify its funding sources and reach investors in a new market. “It’s something “we should have looked at quite frankly some time back.”
China has the second-largest and deepest bond market in the world and “it is the right thing to do” for Pakistan to tap that market, given Pakistan has already sold dollar and Eurobonds, Aurangzeb said.
According to the sources, the Pakistani authorities are confident that there will be an over $2bn inflow during the current fiscal year before June-end, while financial assistance from the World Bank and the Asian Development Bank (ADB) is also expected in 2024-25.
BOOSTING PAKISTAN EXPORTS
Through the planned tariff rationalisation, the government wants to offer a package to the industrial sector to increase domestic production required to boost exports of Pakistani products by making the same competitive in international markets.
Read more: Power basic tariff hike is one of the IMF demands
Rising costs of doing businesses – an obvious result of high interest rates and energy prices – has crippled the economy and made the goal of increasing exports impossible.
In this connection, the sources say different proposals are being drafted for industrial power tariff cuts meant to boost the export-oriented industries.
The industrial sector, the sources added, have to make additional payments for providing subsidy to the domestic electricity consumers.
With estimated cost of Rs100bn to be incurred in 2024-25, the plan will be included the next budget document after its approval by Prime Minister Shehbaz Sharif – a move that can increase exports by $2bn to $3bn.