Pakistan set to clear IMF review, bridge external financing gap— financial experts

Pakistan's finance ministry officials hold meeting with IMF delegation in Islamabad, Pakistan on November 2, 2023. (Pakistan's finance ministry)
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Updated 09 November 2023
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Pakistan set to clear IMF review, bridge external financing gap— financial experts

  • A successful review by the IMF would unlock a $710 million loan tranche for Pakistan by December 
  • Economists say Pakistan hopes to bridge external financing gap with loan rollovers from “friendly countries”

ISLAMABAD: Pakistani economists and financial experts said on Thursday that the South Asian country would be able to successfully bridge its $6.5 billion external financing gap and successfully clear the International Monetary Fund’s (IMF) review for a second loan tranche. 

In July, the IMF approved a nine-month standby arrangement for Pakistan that amounted to $3 billion to support the country’s economic stabilization program and disbursed $1.2 billion as the first loan tranche. The development took place at a time when Pakistan was struggling to bridge an external financing gap to avert a sovereign debt default. 

An IMF mission kicked off its review for the second loan tranche, which is expected to continue till Dec.15, last week. A successful review would unlock $710 million for the South Asian country in December. 

“At the moment, all is set for clearance of this IMF review for the second tranche,” Dr. Vaqar Ahmed, senior economist and joint executive director of the Sustainable Development Policy Institute (SDPI) in Islamabad, told Arab News. 

“But the government will have to ensure fiscal discipline for the next review in February to complete the program.” 

Ahmed said the government was facing an external financing gap of $6.5 billion which it is aiming to bridge by convincing “friendly countries” such as Saudi Arabia, UAE and China to rollover their loans. 
 
He said the IMF has also asked the government to expedite the process of privatizing Pakistan’s national airline and other loss-making state-owned enterprises to generate funds. 

Ahmed said the budget deficit had recorded a “little increase” due to the government’s borrowing, adding that the IMF would want an assurance from Pakistan that it would enhance its revenue collection for the fiscal year ending June 2024. 

He said the IMF wanted to negotiate Pakistan’s next loan program with an elected government, with polls scheduled to be held on Feb. 8. 

“If timely elections are not held, pressure on the rupee will increase,” Ahmed warned. 

Ali Nawaz, economist and chief executive officer of Chase Securities, a securities brokerage company in Pakistan, said the ongoing IMF review would conclude smoothly as Pakistan has met all its targets for the first review. 

Nawaz said the lender would provide the future course of action for the South Asian country to take its economy on the path to sustainable recovery. 

“Pakistan will face challenges to meet the external financing gap in the range of $5bn to $6bn,” Nawaz told Arab News, adding that Pakistan’s economy was “on the right path” to raise funds from multilateral and bilateral partners. 

Ahsan Mehanti, managing director of Arif Habib Commodities, a leading global commodities investor, trader, broker, and investment portfolio firm, said Pakistan’s economic markets were performing well which meant the country would easily clear the IMF review. 

“External financing is an issue but the government has assurances of investments in multiple sectors from Saudi Arabia, UAE, Qatar and China to satisfy IMF’s requirements,” Mehanti told Arab News. 

Senator Dilawar Khan, a member of the Senate’s finance committee, said the government’s economic team was engaged with the IMF for the second loan tranche. He said the external financing gap would be “easily bridged.” 

“Our authorities have effectively stopped smuggling of dollars from Pakistan to Afghanistan through administrative and policy measures,” Khan told Arab News. “This would help us bridge our external financing gap.” 

He said Pakistan’s caretaker finance minister and central bank governor had briefed members of the finance committee that the economic targets mutually agreed by the IMF and Pakistan have been fulfilled. 


Over 50 feared dead in Karachi shopping plaza fire, officials say

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Over 50 feared dead in Karachi shopping plaza fire, officials say

  • Search teams recover 14 bodies as officials warn toll may rise sharply
  • Traders seek urgent compensation after 1,200 shops destroyed in blaze

ISLAMABAD: Pakistani authorities warned on Monday the death toll from a massive fire at a shopping plaza in Karachi could exceed 50, as recovery operations continued a day after the blaze destroyed over 1,200 shops in one of the city’s busiest commercial districts.

The fire broke out late Saturday at Gul Plaza in Karachi’s Saddar business area and spread rapidly through multiple floors. Firefighters battled for more than 24 hours to bring the blaze under control, which was fully extinguished by Monday, officials said, with cooling and debris removal now underway.

Deadly fires in commercial buildings are a recurring problem in Karachi, a city of more than 20 million people, where overcrowding, outdated infrastructure and weak enforcement of fire safety regulations have repeatedly resulted in mass casualties and economic losses.

During a meeting at the Chief Minister’s House on Monday, officials briefed Sindh Chief Minister Murad Ali Shah that 14 bodies had so far been recovered from the site, while the overall death toll could climb significantly as debris is cleared.

“Estimated fatalities could exceed 50,” the Sindh chief minister’s office said in a statement, quoting officials who briefed Shah on the scale of the disaster.

Shah was told that the shopping plaza, built over roughly 8,000 square yards, housed around 1,200 shops, leaving an equal number of traders suddenly without livelihoods. Shah said all affected shopkeepers would be rehabilitated and announced the formation of a committee to recommend compensation amounts and a recovery plan.

“The Gul Plaza building will be rebuilt, and we want to decide how the affected traders can be given shops immediately so their businesses can resume,” Shah said, according to the statement.

Officials said firefighting operations involved 16 fire tenders and water bowzers, with 50 to 60 firefighters taking part. The Karachi Water Board supplied more than 431,000 gallons of water during the operation, while Rescue 1122 ambulances reached the site within minutes of the first alert.

Authorities said access constraints inside the building, along with intense smoke, hampered rescue efforts in the early stages of the fire. A firefighter was among those killed, officials said, noting that his father had also died in the line of duty years earlier.

The provincial government ordered an immediate forensic investigation to determine the cause of the blaze, directing the chief secretary to notify a fact-finding committee. Shah also instructed that debris removal begin without delay so recovery teams could continue searching for victims.

The tragedy has also heightened anxiety within Karachi’s business community. 

The Karachi Chamber of Commerce and Industry (KCCI) has formed a dedicated committee to document losses, coordinate relief and press the government for compensation, saying preliminary assessments indicate more than 1,000 small and medium-sized businesses were completely destroyed.

Ateeq Mir, a traders’ representative, has estimated losses from the fire at over $10 million.

“There is no compensation for life, but we will try our best that the small businessmen who have suffered losses here are compensated in a transparent manner,” Shah told reporters on Sunday night.

Prime Minister Shehbaz Sharif has offered full federal support to provincial authorities, stressing the need for a “coordinated and effective system” to control fires quickly in densely populated urban areas and prevent similar tragedies in the future.

Battling large fires in Karachi’s congested commercial districts remains notoriously difficult. Many markets and plazas are built with narrow access points, encroachments and illegal extensions that block fire tenders, while buildings often lack functioning fire exits, alarms or sprinkler systems. 

Although safety regulations exist, enforcement is sporadic, allowing hazardous wiring and flammable materials to go unchecked — conditions that enable fires to spread rapidly and magnify human and economic losses.