Pakistan to pay $4.6b in interest to IMF - Pakistan Today

Pakistan to pay $4.6b in interest to IMF

Pakistan’s current account balance dipped by a significant 51 percent in the FY13, and thus the interest payment of $4.6 billion to the IMF will keep pressuring economic managers on the balance of payment (BoP) front.

According to analysts at InvestCap Research Pakistan has to pay $3.3b in FY14 and $1.3b in FY15 as interest payments on an IMF loan, which will add to the burden of the country’s balance of payment account.

In FY13 Pakistan’s current account posted a deficit of $2,299m to reach -0.9 percent of the GDP. A major chunk of this contribution came from the services balance where both imports and exports of these services depicted favourable behaviour, the analysts said.

The exports of services showed a 31 percent year over year (YoY) increase and reached $6,619m while imports of services fell by six percent to $7,758m.

$1.8b was received for the Coalition Support Fund (CSF) from the US in exchange for services. The services balance consequently slumped by 64 percent YoY in FY13 to a deficit of $1,139m.

The trade balance rose by four percent YoY where the deficit of $15,765m in FY12 declined by 4,709m to reach $15,056m in FY13. And while the exports of goods remained essentially stagnant, the imports of goods witnessed a meagre two percent YoY decline.

The analysts said that the income account was the only account that posted an unfavourable balance for the current account. Despite a 22 percent decline in interest payments in FY13 the income balance deficit increased to $3,724m.

Worker remittances continued to play their traditional role in supporting the current account balance. They contributed an additional $734m reaching $13,920m in FY13. However, despite this, the current transfers account deficit balance remained essentially stagnant at $17,620m (increasing by a lowly $76m) in FY13.

“Going forward we expect the current account to be led by the trade balance instead of the service balance account,” the analysts said, adding that with a lack of clarity at the exchange rate front and chances of power outages continuing (at least in the short run) to cripple the export oriented textile sector, the potential of the latter to play the role of a saviour seemed constrained.

Related posts