Inflation to begin decelerating over next few months: SBP

With the revival of IMF programme, uncertainty regarding external financing will also fade away, says governor

State Bank of Pakistan (SBP) said on Friday that the country's inflation is expected to start decelerating over the next few months.

"And with the revival of the IMF programme, the uncertainty regarding external financing will also fade away," central bank governor Jameel Ahmad said in a statement.

Pakistan has less than a month's worth of foreign exchange reserves and is awaiting a bailout package of $1.1 billion from the IMF that has been delayed since November over issues related to fiscal policy adjustments.

Earlier, Finance Minister Ishaq Dar announced that the United Arab Emirates (UAE) had confirmed to the IMF its bilateral support of $1 billion to Pakistan, which was the last requisite to complete staff-level agreements with the global lender.

Read more: IMF cuts Pakistan’s growth forecast, sees hike in inflation

Taking to his official Twitter handle, the finance czar said that the State Bank of Pakistan was now “engaged for needful documentation for taking the said deposit from UAE authorities”.

IMF program — 9th Review Update:

UAE authorities have confirmed to IMF for their bilateral support of US $ One billion to Pakistan.

State Bank of Pakistan is now engaged for needful documentation for taking the said deposit from UAE authorities.

AlhamdoLilah!

— Ishaq Dar (@MIshaqDar50) April 14, 2023

IMF meetings

In a meeting earlier, Pakistan emphatically requested the IMF to show some flexibility and sign the staff-level agreement, however, it could not get a date despite Islamabad’s growing concerns about the fallout of a worsening economic crisis.

The request was made by Finance Minister Ishaq Dar in a virtual meeting with Jihad Azour, the IMF’s director for the Middle East and Central Asia Department. However, the minister could not get the desired result, as the IMF once again raised the issue of petrol subsidy and possible fiscal leakages as a result of the implementation of the subsidy plan.

Both sides have shared their respective positions on the $6 billion external financing requirements -- a sum that Pakistan needed from now till June to avoid default.

The IMF was informed that Saudi Arabia had given confirmation about the $2 billion lending to Pakistan and Dar had assured that the UAE would soon confirm its commitment to give $1 billion.

Read $6 billion financing plan remains elusive

The two sides also discussed the progress made on the IMF programme, particularly the talks held with the IMF mission during its visit to Pakistan, and the implementation of prior actions, according to the press statement issued by the finance ministry.

During the first eight months of this fiscal year, the current account deficit remained at $3.9 billion. Dar assured the IMF that in case the Fund signed the staff-level agreement, Pakistan would arrange the $2 billion additional loan from the World Bank, the Asian Infrastructure Investment Bank and the commercial banks.

But the IMF was asking for arranging commercial loans before the staff-level agreement -- a demand that Pakistan is unable to meet in absence of the IMF umbrella.