ISLAMABAD: The Senate Standing Committee on Economic Affairs was briefed on Pakistan’s financial dealings with the International Monetary Fund (IMF), revealing that the country had secured a loan under a Standby Arrangement (SBA) in 2023 at a high interest rate of 5.09%.
Officials from the Ministry of Finance and the State Bank of Pakistan (SBP) provided a comprehensive overview of the IMF funds received by Pakistan, from the first IMF program to June 2024, during a committee meeting.
Committee Chairman Senator Saifullah Abro raised concerns about the expenditure of Rs90 billion on political schemes following the receipt of the IMF loan. The committee demanded details on how the IMF loan was utilized.
It was disclosed that the IMF had disbursed 2,126 million Special Drawing Rights (SDRs) to Pakistan, with the country expected to repay over $6.36 billion in SDRs within the next three to five years. Since 1984, Pakistan has paid $2,439 million in interest to the IMF.
The committee was informed that Pakistan has had to turn to the IMF repeatedly due to persistent balance of payments issues. A detailed briefing was also provided on ongoing and completed projects within the Power and Water Resources Division, covering proposals, tender processes, and the latest progress, as well as the interest paid by the federal government on various loans.
Details of Pakistan’s domestic and external debts were shared, including loans from banks, the private sector, and intercompany loans. The outstanding amount of Eurobonds owed by Pakistan stood at $6,800 million as of June 2024.
Since 1958, Pakistan has engaged in 24 full programs and 4 one-time facilities with the IMF. The most recent is the 2023 Standby Arrangement (SBA), with the country having drawn a total of SDR 21,260.08 million from the IMF and owing an outstanding principal of SDR 6,369.16 million as of June 30, 2024. The total interest paid on IMF loans amounts to SDR 2,439 million.
Additionally, the committee received information on the interest payments made on Eurobonds and Sukuk issued by the government, including principal and interest payments from 2005 to 2010. The interest rate on the 2008 and 2010 IMF programs was noted to be 1.58%.
The committee discussed the 5.09% interest rate on the 2023 Standby Arrangement, highlighting that Pakistan had entered into six programs with the IMF between 2008 and 2023.
During the meeting, Senator Abro questioned why Pakistan needed to approach the IMF in 1958 when it had previously lent a loan to Germany in that same year.
The committee was also briefed on ongoing multilateral and bilateral development projects, including $5,908 million worth of multilateral projects in sectors like water and power, with $2,012 million already spent. The briefing covered 26 bilateral development projects worth $1,788 million, with $743 million spent as of June 2024, involving partners such as Japan, Kuwait, Germany, France, USAID, and Saudi Arabia.
Among the ongoing projects is the 5th expansion of the Tarbela Dam hydropower project, which began in 2017 and is expected to be completed by September 2027. The project aims to generate 1,410 MW of electricity, with 33% of the electro-mechanical works completed and tunnel work anticipated to finish by 2027.
The committee also reviewed the progress of the Dasu Hydropower project, a Stage 1 project aimed at generating 2,160 MW of electricity at a total cost of $588 million. Originally scheduled for completion in 2024, the project has been delayed and is now expected to finish in 2028. Significant progress has been made on associated works, including 40% completion of the KKH redesign, 70% completion of the colony, and 96% completion of the 132 kV transmission line. However, challenges related to the power house, new KKH sites, land acquisition, and security have caused setbacks, potentially leading to financial losses.
The committee expressed concern over the slow progress of the Dasu transmission line project, a 765 kV line approved in October 2020 with a budget of $700 million. The first lot of this project, worth $330 million, began on February 10, 2023. Lot 1 includes 604 towers, while Lot 2 consists of 280 towers, costing $186.4 million. Worryingly, foundation work for the 604 towers in Lot 1 has not yet been completed.
The committee further noted that Lot 3 of the Dasu transmission line project, valued at $135.9 million, has only achieved 17.5% progress. The chairman emphasized the need for work to commence promptly as previous phases are completed to meet deadlines.
Committee members voiced their concern over the absence of the Federal Minister for Economic Affairs during the meeting, stressing that the presence of relevant ministers would facilitate more effective discussions and decisions. The chairman also called for more detailed working papers to enable the committee to thoroughly examine issues and make informed recommendations.
