Federal Minister of Finance Miftah Ismail said Tuesday the government will be able to deal with the external financing gap that is $4 billion within the next few months.
"We can close the gap in financing for external sources of $4 billion within the next few months. We will meet the IMF and it will be easy to address the external gap" Federal Minister for Finance spoke to The News.
In response to questions about the growing pressures on exchange rates and the persistent decline of the rupee versus the US dollar The finance minister stated that the compression in imports was pave the way to achieve the desired outcomes as the imports during the first month of the July were at $2.6 billion. It was anticipated that the overall import bill could not exceed $5.5 billion during the entire month of July 2022. The dollar was increasing against all currencies, he stated and added that the economy was expected to be stabilized.
However, sources say the repayment obligation boosted the demand for dollars on the interbank markets, however, it was the State Bank of Pakistan that did not intervene in the market, which meant the rupee's decline continued against the dollar.
They also said that the share that is held by Saudi Arabia in IMF's quota because of Special Drawing Rights (SDRs) could have to be transferred over to Pakistan. The possibility is being considered and Pakistani authorities have confirmed that the IMF has contacted KSA to request permission to permit Islamabad to benefit from KSA shares.
"The modalities are under consideration and a decision to this effect may be finalized within the next couple of weeks," said a top official.
The sources stated that it was a bit odd in one part of IMF that it asked the loan recipient to address the gap in financing from external sources in this manner since the condition as a precondition for prior action cannot be taken into consideration as a valid option by Pakistani authorities. Instead of filling the whole gap in external financing by the IMF the organization has instead placed the responsibility on Pakistani authorities to cover the gap of four billion dollars and after that, the IMF's Board would give its approval to the completion of the 7th and 8th reviews as well as the release of $1.17 billion to help the country's struggling economy.
The finance minister claimed it was the coalition's "priority" to save Pakistan from going into default after the rupee smashed an all-time record against the dollar, and the stock market suffered a blow in the course of trading.
The Pakistani rupee touched the record low of 223 against the dollar during afternoon interbank trading and closed at 221.99 -the highest daily depreciation following June 26th, 2019, as the benchmark KSE-100 index ended at 40,389.07 points, which is a record high for the 20th month.
Analysts noted that political uncertainty that has arisen from the Punjab by-polls as well as the International Monetary Fund's (IMF) delay, and the decreasing Forex reserve have caused a negative impact on the markets.
The finance minister talking about his appearance on the Geo News program "Aaj Shahzeb Khanzada Kay Saath", was also vocal about the same issues and said that the rupee's decline was not linked to demand or supply. He claimed that the rupee is constantly declining because of uncertainty in the political scene, gambling, and speculations. However, at the same time, he said that the threat of default was not hanging over Pakistan.
The finance minister has praised the government's tough choices in avoiding default. The increase in the price of petroleum products as well as the tariffs for gas and power along with other fiscal measures also helped pave the way for the vital staff-level agreement with IMF.
To ensure secure the IMF loan, Prime Minister Shehbaz Shehbaz issued three price increases on fuel which totaled 50 percent -- and also increased the price of electricity to end the subsidies that were introduced by Imran Khan's government. After the IMF agreement was signed, the government cut the cost of gasoline to Rs18.50 per liter, and diesel to Rs40.50 each liter.
Miftah claimed that If the government can get the fiscal space it needs, it can lower the cost of gasoline further. He said the government was striving to get over a significant issue with that deficit in the account of current transactions and to reduce it but at the same time increasing exports in order to reduce the economy can be pushed to the limit by subsidy levels.
He added that if the current government remains in power, it would be a good thing for Pakistan because it would ensure stability. Miftah stated that despite the instability, the foundations of the economy had "strengthened" over the last four months. He said it was essential for the government to adopt non-popular steps. But he added that it also led to a political backlash which is why the PMLN was defeated by PTI during Punjab by-elections. "If need be, we will take more tough decisions," Miftah said. Miftah claimed that the loan from IMF will be approved soon and, if it was approved, friendly countries would be willing to lend a hand to Pakistan.