IMF Deposits $1.2 Billion
The International Monetary Fund (IMF) has recently made a significant deposit of $1.2 billion into the State Bank of Pakistan (SBP). This development comes as part of the approved $3 billion Stand-by Arrangement (SBA) program and has been confirmed by Finance Minister Ishaq Dar during a media briefing.
The deposit made by the IMF amounts to $1.2 billion, which constitutes the first tranche of the approved SBA program. Minister Ishaq Dar revealed that the remaining $1.8 billion will be disbursed after two reviews, scheduled for November and February. The deposit is expected to substantially enhance Pakistan’s foreign exchange reserves. Following the closure of this week’s transactions, the SBP reserves are projected to exhibit an impressive increase of $4.2 billion.
Strengthening Foreign Exchange Reserves
When combined with prior disbursements of $1 billion from the United Arab Emirates and $2 billion from the Kingdom of Saudi Arabia, the IMF’s tranche will significantly bolster the SBP’s foreign exchange reserves. The total reserves are expected to surpass $8.5 billion. The effects of this infusion of funds are likely to be evident in the forthcoming central bank market update.
IMF’s Support in Challenging Times
The IMF’s decision to approve a 9-month SBA for Pakistan, amounting to SDR2,250 million (equivalent to approximately $3 billion or 111 percent of quota), comes at a challenging economic juncture for the country. Pakistan has faced numerous difficulties, including an adverse external environment, devastating floods, and policy missteps, which have contributed to substantial fiscal and external deficits, mounting inflation, and diminished reserve buffers throughout FY23. The IMF emphasized these circumstances in their official statement.
A Stabilization Program for Pakistan
The newly established SBA-supported program is designed to serve as a policy anchor for addressing both domestic and external imbalances. It provides a framework for financial support from multilateral and bilateral partners. By aligning with this program, Pakistan aims to stabilize its economy and address the existing challenges effectively.
Immediate and Future Disbursements
The disbursement of $1.2 billion signifies the IMF Executive Board’s prompt implementation of the approved SBA program. The remaining funds will be released in phases over the course of the program, subject to two quarterly reviews conducted within the 9-month duration.
The deposit of $1.2 billion by the IMF into the State Bank of Pakistan marks a significant step in bolstering Pakistan’s foreign exchange reserves. This deposit, combined with previous disbursements from the United Arab Emirates and the Kingdom of Saudi Arabia, is expected to raise the reserves to over $8.5 billion. The approval of the SBA program demonstrates the IMF’s commitment to supporting Pakistan’s economic stabilization efforts. With this support, Pakistan aims to address its domestic and external imbalances and secure financial assistance from various partners.