Pakistan receives third IMF tranche of nearly $500m

Development comes after Islamabad resumes stalled $6 billion loan programme

KARACHI:

Pakistan on Tuesday received third tranche of nearly $500 million from the International Monetary Fund's (IMF) loan programme, almost a week after it approved four pending reviews of the country’s economy.

"SBP has received IMF tranche of US$ 498.7 million (equivalent to SDR 350 million) under the Extended Fund Facility," Pakistan's central bank said on its official Twitter handle.

#SBP has received IMF tranche of US$ 498.7 million (equivalent to SDR 350 million) under the Extended Fund Facility.

— SBP (@StateBank_Pak) March 30, 2021

The tranche was received after Islamabad resumed the $6 billion loan programme a couple of weeks ago. The programme was on hold since the Covid-19 outbreak in the country in February 2020.

The government took some tough decisions to get the programme resumed including increase in electricity tariff, withdrew income tax exemption worth Rs140 billion and introduced controversial amendments in the central bank's laws to make it an independent institution.

The tough decisions are estimated to keep inflation reading high at around 9% compared to the government target of 6.1% in the ongoing fiscal year 2021.

With the receipt of the latest tranche, Pakistan has received a total around $2 billion so far. The country first agreed the tough loan programme in May 2019.

The revival of the IMF loan programme has revived global investors’ confidence on Pakistan.

This paved the way for Pakistan to raise $2.5 billion from international markets through sell of 5 to 30-year Eurobond.

Also read: IMF programme back on track

Besides, the programme also helped the country to get another $10-12 billion each from the World Bank (WB) and the Asian Development Bank (ADB) over the next five years.

Pakistan's foreign currency reserves surged to $275 million to the recent 3-year high at $13.29 billion in the week ended on March 19, the central bank said in its latest weekly update last Thursday.

The reserves have partially increased as a result on structural reforms including introduction of market based rupee-dollar exchange rate system in May 2019.

Moreover, the country had taken measure to cut import bills and support exports to grow. Such measures helped turning the balance of current account in deficit at $19 billion in Fiscal year 2018 to a surplus at $881 million in the first 8-month (Jul-Feb) of current fiscal year 2021.