This will be the 18th tranche to repay an IMF loan taken in November 2008. On August 26, Pakistan will pay back another $258.5 million SDR or about $393 million to the IMF. ILLUSTRATION: JAMAL KHURSHID
ISLAMABAD:
As promised assistance from the Islamic Development Bank could not arrive on Thursday, Pakistan’s low foreign currency reserves will drop further as it returns today (Friday) another tranche of $145.4 million to the International Monetary Fund.
This will be the 18th tranche to repay an IMF loan taken in November 2008. On August 26, Pakistan will pay back another $258.5 million SDR or about $393 million to the IMF.
With these two big payments of about $538 million, gross foreign currency reserves held by the State Bank of Pakistan will fall below $4.5 billion until some assistance comes from abroad.
On August 2, the gross reserves stood at $5.2 billion. By excluding forward contract liabilities of over $3 billion, net reserves of the SBP remain at around $2.2 billion, sufficient only for half a month of imports.
As uncertainty prevails over whether the IMF will make quarterly releases of the anticipated $7.3 billion loan before implementation of conditions or after implementation of quarterly performance criteria, Pakistan has approached other multilateral lenders for some financial relief.
So far, the IMF has indicated that it could give $6.6 billion against Pakistan’s request for $7.3 billion, according to finance ministry officials. The IMF is not yet ready to give the loan in advance as Islamabad wants to use the same amount to return the previous IMF loan to ease pressure on the reserves. The IMF will take up the loan request in early September.
During his visit to Saudi Arabia early this month, Finance Minister Ishaq Dar met with the Islamic Development Bank president, seeking €750 million in short-term loan.
According to a statement issued by the finance ministry on August 3, the IDB president agreed to extend the loan and release the first tranche before August 15.
Pakistan was expecting up to €200 million before repayment to the IMF. However, the promised aid could not arrive on Thursday, according to officials of the finance ministry and the State Bank of Pakistan. But they hoped that the amount may come anytime soon.
After taking over, Dar had written a letter to the IDB president and sought €750 million. In response, the IDB sought guarantees from the central bank which the SBP did not extend until Dar intervened, the officials added.
Had the governor timely approved the guarantees, the IDB loan would have arrived by now, they added.
With fresh repayment of $145.4 million, Pakistan will return a total of $4.7 billion to the IMF out of $7.8 billion it borrowed under the bailout programme. Islamabad will return over $3 billion this fiscal year.
The repayments to the IMF have taken a heavy toll on foreign currency reserves with foreign investment staying negligible.
SBP spokesperson Umar Siddique said with payment of the 18th installment, Pakistan to date has repaid $4.66 billion to the IMF since July 2011.
Published in The Express Tribune, August 16th, 2013.
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COMMENTS (23)
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@SHB: Naresh to my little knowledge is not a Pakistani name . Please read the following Article: . http://tribune.com.pk/story/592885/sibling-love-raksha-bandhan-celebrated-with-gifts-and-promises/ . Sibling love : Raksha Bandhan celebrated with gifts and promises . Dr Naresh Kumar said that the Raksha Bandhan portrays hopes for a harmonious family life. . You don'r seem to know your own People i.e. People of Pakistan! . I have many Butts among my friends but most of them are from Kashmir. . This being an Internet Forum-Blog it speaks volumes for the Express Tribune having such a wide readership. . Cheers
@Naresh: SHB stands for Shahid H Butt. I am from Pakistan . ,born in Pakistan, raised in Pakistan and proud to be Pakistani. What ever I am today it is because of Pakistan. Pakistan gave me opportunity to be educated and be a successful person. So all of my accomplishment are because of Pakistan. I am a successful medical specialist practicing in USA and always thankful to my Pakistan. So I am not from India or Bangladesh with all the due respect.
Naresh to my little knowledge is not a Pakistani name or even Bangledeshi name. The way you comment about affairs of pakistan is different. You try to be more negative than going for the positive side of the picture. If you are from India, which I think so, you should be minding your own business instead of worrying about Pakistan.
As for SBP and foreign exchange or reserve is concerned it is none of your business. Hope fully you will take care of problems of your country of origin. Wish you best of luck.
@abdussamad: Please try and keep up with the times. India is currently facing its own foreign exchange reserves crisis. The Indian Rupee has plunged 12% since May this year. India may have to turn to the IMF itself! . India has invested about US$ TEN Billion in the IMF. . Cheers
@SHB: 1. Since govt is using $ sent by overseas Pakistani for external deficits then it is not that bad situation but it is not perilous. You are ignoring that fourteen billion dollars which came in that last financial yr. Obviously I would like to see more money with SBP. By the way , 2. Naresh is Indian or Pakistani name? Can you identify yourself? . 1. Just as SHB could be an Indian or Pakistani or Bangladeshi name similarly Naresh is an Indian or Pakistani or Bangladeshi Name. . 2. If you visit the SBP Wen Site you will find that US Dollars 13.920 Billion has already been Credied in the Summary Balance of Payments where the Current Account Balance for July 2012 - June 2013 shows a Current Account Balance of US$ 2.299 NEGATIVE. . The US$ 14 Billion came in as Workers' Remittans which the Pakistani Receipiants use for their own Purposes and cannot be as well as are NOT UNDER THE CONTROL OF SBP OR THE GOVERNMENT OF PAKISTAN! . Cheers
@Naresh: Since govt is using $ sent by overseas Pakistani for external deficits then it is not that bad situation but it is not perilous. You are ignoring that fourteen billion dollars which came in that last financial yr. Obviously I would like to see more money with SBP. By the way , Naresh is Indian or Pakistani name? Can you identify yourself?
@ Author : On August 2, the gross reserves stood at $5.2 billion. By excluding forward contract liabilities of over $3 billion, net reserves of the SBP remain at around $2.2 billion, sufficient only for half a month of imports. . This is a perilous situation - to say the least. . Cheers
@FYI: Chinese friendship is just a myth. There has never been any real investment in Pakistan by them. Amongst the countries engaged in FDI, China is not even in the top5 and this is a fact.
@H.A. Khan...may be you did not suffer when foreign account was frozen during Nawaz shreef rule
@SHB:
We are using them. To finance the external deficit.
Why not phone Etisalat? ++++++++++++++++++ Some 800 Mn usd......
China should help Pakistan in this hour of need.
@SHB: Pakistan imports double what it exports. Half of all imports are financed by foreign exchange earned from exports and the other half from remittances. Nothing is left over to service foreign debt. Pakistan's imports consist primarily of petroleum products that are essential for the functioning of the economy.
@FYI: Please try and keep up with the times. India is currently facing its own foreign exchange reserves crisis. The Indian Rupee has plunged 12% since May this year. India may have to turn to the IMF itself!
If Pak govt can get into "circular debts" for repmt to IMF, the power producers have done the same.
@Uzair Malik:
"Not really infavour of loans but if all else fails, our Chinese neighbours are topping the charts with $3.2 trillion in reserves."
Yes, China, the greatest friend and brother of Pakistan should step in immediately and give Pakistan $15B totally free. After all, what are "relatives" deeper than the ocean, taller than the Himalayas, and sweeter than honey good for if not give free dollars to the best friend in need?
@Uzair Malik: Dude, we all know what China has done for Pakistan. Having a friend like China should make Pakistan a very developed Economy and an Industrialised Country. Past many decades Sweet Honey and Tall Mountain like Friend China has not done much to Pakistan. You will have to agree !
Not really infavour of loans but if all else fails, our Chinese neighbours are topping the charts with $3.2 trillion in reserves.
The government should seriously consider encouraging foreign currency deposits of overseas Pakistani(s) and locals and provide fair return on deposits and sovereign guarantees ensuring security. My estimate is that over $ 8 billion will flow into Pakistan in 3 months. This fiscal space is needed for development and economic turnaround.
Good article ET
A default is immiment
Pakistan could borrow some $ from its arch rival and neighbour India. It is already lending money to many small countries on cheaper rates of Interests than World Bank / IMF. As against Pakistan's $2.2 billion Reserve, India has $277.16 billion as on August 2, 2013.
Can govt use those dollars which overseas Pakistani send home to their families?Last yr more than fourteen billion dollars were sent. Any body to answer. I am not a finance person.
Reserves are always under pressure when repayment time comes. Isn't that a real discovery for elite Pakistanis and the media as they are used to defaulting on Bank Debt?? I wish they would default on IMF Debt too, to keep up with their best practices.
Great job! Keep piling up interest payments and keep swimming against banker's arithmetic.