Bending over backwards: Pakistan paves way for $7.3 bln IMF loan

Federal government orders SBP to purchase $100 million from open market on the day of the deadline.

ISLAMABAD: The federal government has advised the State Bank of Pakistan to immediately purchase $100 million from the open market in a move to fulfill the last remaining condition set by International Monetary Fund to qualify for a $7.3 billion loan, according to sources in Ministry of Finance.

With the purchase of $100 million from open market for the buildup foreign currency reserves, the country will be all set to receive the $7.3 billion loan to be approved by the IMF Executive Board next month.

This condition was met on the last day of the deadline, which expired on Tuesday.

Earlier, Pakistan paved the way for the new loan after it met all other conditions set by the IMF.

Sources said that the IMF has asked Pakistan to mop up dollars from the market, as the country's net foreign reserves excluding forward contract liabilities and IMF's immediate liabilities, have slipped into negative.

The SBP's intervention in the market is likely to bring the rupee under further pressure after having already been traded at the lowest level against the greenback.

The net reserves, held by the SBP, stood at $5.2 billion as of August 2. Out of that, the SBP owes $2.4 billion in forward contracts while the IMF's immediate liabilities have been estimated at over $3 billion.

Earlier in the month, the IMF had approved Pakistan to make an approach for $6.3 billion loan. This follows from the loan it approved in early July.