Pakistan: Pakistan in deep economic crisis needs $ 51.6 billion in external financing over two years

Pakistan is in the throes of a deep economic crisis, with the country needing gross external financing of USD 51.6 billion over a two-year period (2021-2023) to meet its needs.

Despite very conservative estimates assessed by the IMF, Pakistan’s gross external financing requirement stands at USD 23.6 billion in 2021-2022 and USD 28 billion in 2022-2023, reported The News International.

The Pakistani authorities are making ultimate efforts to conclude a staff level agreement with the International Monetary Fund (IMF) to fill the gap in external financing needs.

Without reaching an agreement with the IMF under the $ 6 billion Extended Financing Facility (EFF) during the ongoing talks in Washington, this massive gross external financing need will be threatened following the suspension of loans- programs of other multilateral creditors such as the World Bank (WB) and the Asian Development Bank (ADB), reported The News International.

The WB and the ADB will continue to grant project loans, but given the capacity for project implementation, disbursement is becoming woefully low.

Credit rating agencies could downgrade the country’s ratings even further, so generating funds by issuing international bonds will become costly, The News International reported.

Official sources said the IMF is calling for the removal of distortions in the tax system and stressed that the various exemptions and GST rates should be aligned with the standard rate of 17%.

The standard rate of GST of 17% should be imposed on petroleum oil-based lubricant (POL) products. The GST rate on fertilizers, tractors and other items should be reduced to the standard rate of 17%, The News International reported.

However, Pakistani authorities oppose the proposals, arguing that they would further marginalize the neglected agricultural sector.

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