Pakistan in a critical balance of payments situation, says ADB

ISLAMABAD: Pakistan has reached a critical balance of payments situation and will need another package from the International Monetary Fund (IMF) before the end of the year to avert a crisis, one of the biggest lenders to the country claimed on Wednesday.

Asian Development Bank’s country director Werner Liepach also told Reuters in an interview Pakistan would need up to $9 billion from the IMF to shield the economy.

Pakistan currently has enough hard currency to cover only about two months of imports.

Answering a question whether the country was in a balance of payments crisis, Mr Liepach said: “It depends how you define a crisis. Maybe we are already in a crisis.”

In 2008, the country averted a balance of payments problem by securing an $11bn IMF loan package, but the IMF suspended the programme in 2011 after economic and reform targets were missed.

Asked if Pakistan could avoid going back to the IMF, Mr Liepach said: “I don’t see that happening. It’s a question of time. They need to do this before the end of this calendar year. It needs to be $6 billion to $9 billion.”

So far, remittances from Pakistanis working overseas of about $1bn a month have helped keep Pakistan afloat, but by a thin margin.

“We are now at less than three months of imports. The current outlook is for a further decline in foreign exchange reserves,” said Mr Liepach.—Reuters