Business

Pakistan-IMF deal: Dar says Saudi Arabia has deposited $2bn in SBP account

Published

10 months ago

Farwa

Ishaq Dar thanks “true brother” Saudi Arabia.
Pakistan also seeks from other friendly nations.
IMF’s board meeting to approve loan on July 12.

Finance Minister Ishaq Dar said Tuesday that Saudi Arabia deposited $2 billion in the State Bank of Pakistan (SBP) days after Islamabad reached a staff-level agreement with the International Monetary Fund (IMF) on a $3 billion Stand-By Arrangement.

“SBP has received a deposit of $2 billion from the Kingdom of Saudi Arabia,” Dar said during a press conference, adding that this inflow has increased the forex reserves held by the central bank and will accordingly be reflected in the forex reserves for the week ending July 14.

The inflows came after Islamabad signed the short-term IMF deal on June 30 under a standby arrangement that will disburse $3 billion over a nine-month period, subject to approval by the IMF’s board, which is meeting on July 12.

Multilateral and bilateral funds were a major obstacle in the way of Pakistan’s deal with the IMF — which remained stalled for more than nine months and expired.

The SBA has now provided the nation with a breathing space, avoiding a sovereign default, and helped the government streamline fiscal policies.

With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of the IMF bailout.

Dar — on behalf of Prime Minister Shehbaz Sharif — thanked Chief of Army Staff General Asim Munir for playing his role in helping the government, while he also lavished praise on Saudi rulers for being “true brothers”.

“In the coming days, I believe that there will be more positive developments on the economic front […] we have reached stability,” the finance minister said.

After the IMF deal, Fitch credit rating agency Monday — after almost a year — upgraded Pakistan’s long-term foreign currency issuer default rating to CCC from CCC-.

Fitch said in a statement the upgrade reflected the country’s improved external liquidity and funding conditions following a SLA with the IMF, but warned that the fiscal deficit still remained wide.

With the IMF deal in place, Pakistan can now unlock other external financing.

In the plan sent to the lender, sources in the Finance Division said that Pakistan arranged $3.5 billion in bilateral funds from China, $2 billion from Saudi Arabia, and $1 from the United Arab Emirates.

On the multilateral side, Pakistan aims to secure $500 million from Asian Development Bank, $500 million from World Bank, and $3 billion from the IMF.

Fitch said local authorities expect $25 billion in gross new external financing in FY24, against $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.

The South Asian nation has seen also seen severe political uncertainty since former prime minister Imran Khan was ousted through a no-confidence motion in April last year.

In a bid to ensure that the programme’s measures are implemented in the lead-up to the elections due in October, the lender’s team met all mainstream political parties to seek support and consensus for the SBA.

Khan’s Pakistan Tehreek-e-Insaf said he gave his support for the deal.

Business

Pakistan’s $1.1 billion loan tranche is approved by the IMF board.

Published

2 days ago

Farwa

The cash is the third and last installment of a $3 billion standby agreement with the international lender that it obtained to prevent a sovereign default last year and that expires this month.

Following the discussion of Pakistan’s request for the release of funds at today’s IMF Executive Board meeting in Washington, the final tranche was authorized.

Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month about the last assessment of a $3 billion loan package.

The total amount of $1.9 billion that the nation has received thus far is divided into two tranches: $1.2 billion in July and $700 million in January 2024.

According to Finance Minister Muhammad Aurangzeb, Islamabad could have a staff-level agreement on the new program by early July. Pakistan is asking the IMF for a fresh, longer-term loan.

In order to support macroeconomic stability and carry out long-overdue and difficult structural changes, Islamabad says it is seeking a loan for a minimum of three years; however, Aurangzeb has reluctant to specify the specific program in question. If approved, it would be Pakistan’s 24th IMF bailout.

See Also: Pakistan formally requests new IMF assistance

The event transpired on the day following Prime Minister Shehbaz Sharif’s meeting with IMF Managing Director Kristalina Georgieva, during which he reaffirmed the government’s resolve to restart Pakistan’s economy.

During the meeting held in conjunction with the World Economic Forum Special Meeting, the prime minister announced that he had given his finance minister, Muhammad Aurangzeb, strict instructions to implement structural reforms, maintain strict fiscal discipline, and pursue prudent policies that would guarantee macroeconomic stability and continuous economic growth.

Georgieva was commended by him for helping Pakistan obtain the $3 billion Standby Arrangement (SBA) from the IMF last year, which was about to be finalized.

Business

Macroeconomic circumstances in Pakistan have improved.

Published

2 days ago

Farwa

By virtue of the Board’s resolution, SDR 828 million, or roughly $1.1 billion, can be disbursed immediately, increasing the total amount disbursed under the arrangement to SDR 2.250 billion, or roughly $3 billion.

After being adopted by the Executive Board on July 12, 2023, Pakistan’s nine-month SBA effectively served as a framework for financial support from both bilateral and multilateral partners, as well as a policy anchor to resolve imbalances both domestically and internationally.

According to the official announcement from the IMF, Pakistan’s macroeconomic conditions have improved during the program. Given the ongoing recovery in the second half of the fiscal year, growth of two percent is anticipated in FY24.

With a primary surplus of 1.8 percent of GDP in the first half of the fiscal year 2024—well ahead of expectations and putting Pakistan on track to meet its target primary surplus of 0.4 percent of GDP by the end of the fiscal year—the country’s fiscal condition is still strengthening.

Even while it is still high, inflation is still falling and should end up at about 20 percent by the end of June if data-driven and adequately tight monetary policy is continued.

In contrast to 11.4 per cent last year, the IMF predicted in an official statement that Pakistan’s tax collection and grants will stay at 12.5% of GDP in FY2024.

After remaining at 7.8% of GDP in FY2023, the deficit is predicted to stay at 7.5% of GDP in FY2024.

Business

Pakistan’s fuel prices should drop.

Published

2 days ago

Farwa

At 0423 GMT, U.S. West Texas Intermediate crude prices fell 13 cents, or 0.16%, to $82.50 a barrel, while Brent crude futures were down 10 cents, or 0.11%, to $88.30 a barrel.

Both benchmarks’ front-month contracts saw losses of over 1% on Monday.

on line with the worldwide trend, the price of gasoline is anticipated to decrease by Rs. 5.4 per liter on the local market. In the same way, buyers in the Pakistani market may see a drop in the price of diesel of Rs8 a litre.

Additionally, it is anticipated that the prices of light fuel and kerosene will decrease by Rs5.40 and Rs8.3 per liter, respectively.

The finance ministry will receive a summary from the Oil and Gas Regulatory Authority (OGRA), and PM Shehbaz Sharif will be consulted before a final decision is made today.

The federal government raised the cost of gasoline by Rs. 4.53 per liter and diesel by Rs. 8.14 per liter at the most recent review.

At the moment, the price of gasoline was Rs 293.94 per liter, while the price of high-speed diesel was Rs 290.38 per liter.