Amid dwindling foreign reserves and a depreciating currency, the government is looking for all avenues to generate funds as Pakistan is now seeking the US support to generate funds through donors.
It is reported that the cash-starved country will press the Biden administration to use its influence on multilateral creditors to provide loans worth around $13 billion for different development projects.
Any success in achieving the goal would be a great success as Pakistan badly needs funds to overcome the deficit and boost the markets where sentiments are at the lowest.
The target is the upcoming donors’ conference to be held in Geneva on January 9 for the reconstruction of flood-affected areas for which a special document that would contain the details of over two dozen infrastructure ventures. One of these initiatives is the Flood Protection Project at an estimated cost of $4 billion.
As far as the other projects are concerned, the government plans to utilise $8 billion from its own budgetary resources with the remaining $8.2 billion from multilateral and bilateral creditors out of the total reconstruction cost of over $16 billion as the financing gap is required for reconstruction in flood-hit areas.
Out of the $8.2 billion identified as a financing gap by Pakistani authorities, the multilateral creditors including the World Bank, Asian Development Bank and Asian Infrastructure Investment Bank (AIIB) committed and approved $2 billion projects for the reconstruction phase in flood-affected areas while $400 million were re-purposed by these multilateral financial institutions.
So far Pakistan has received commitments of $2.4 billion while expecting another $1 billion from other multilateral and bilateral creditors at the donors’ conference.
Pakistan will also be vying for receiving grants from donors for education, health, and other social sector areas in the upcoming conference.
Dollar flight to Afghanistan
Pakistan is currently multiple problems as managing the existing supply of dollars has become a serious problem for the country.
Finance Minister Ishaq Dar was first to acknowledge smuggling of dollar to Afghanistan and now those in the currency market have spoken too, saying Pakistan was experiencing large-scale outflow of greenback to the neighbouring country after the Taliban’s takeover of Kabul last year.
It had eroded Pakistan’s foreign exchange reserves with the exchange rate going down thanks to smuggling, fake imports of dollars and Islamabad’s negligence towards the issue, said Malik Bostan – who is the chairman of Exchange Companies Association of Pakistan.
One may recall that Dar has repeatedly pointed out this issue but, sadly, the government remains unable to control the illegal movement for whatever reasons there may be.