Reserves under pressure: Pakistan repays another $145m to IMF today
Promised IDB assistance could not come in time support forex reserves.
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.
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.