As the State Bank of Pakistan remains tightlipped over the source and purpose of funding, Pakistan received another tranche of $750 million in the newly-established Pakistan Development Fund (PDF), taking the total contribution to $1.5 billion so far.
Highly-placed sources told The Express Tribune that friendly countries have injected another sum of $750 million in the PDF – an account opened to channel money from abroad. The last tranche was received in February that stabilised the dwindling official foreign currency reserves.
It is the first time that any country has generously given $1.5-billion assistance to Pakistan within one month, as Islamabad never received such an amount as ‘upfront’ payments. The US, which remains the largest contributor, always gave amounts in tranches spreading over several years. Under its five-year, $7.5-billion Kerry Lugar aid package, Washington gave less than $2.5 billion in government-to-government assistance in over three years.
However, it was not clear whether the money received is a grant or depositary loans aimed at temporarily bailing out the country.
The officials, seeking anonymity, confirmed the receipts but none of the concerned government agencies came on the record.
SBP chief spokesman Umar Siddiqui did not respond to queries regarding receipt of the $750-million second tranche.
However, a statement issued by the Ministry of Finance, quoting Finance Minister Ishaq Dar, said, “The government of Pakistan has implemented concrete steps to improve the overall external position by ensuring substantial capital and financial inflows in the country.
“As a result, reserves have improved substantially in the last one month. This has been made possible by not only receiving larger inflows from multilateral and bilateral resources; but also through attracting forex flows through the capital markets and better home remittances.
“The forex reserves of the country have improved from $7.59 billion on February 7, to $ 9.37 billion on March 7. The efforts of the government have started to show positive results and are on track to deliver what we had announced earlier that our forex reserves will reach around $10 billion by the end of March.”
Dar’s statement also came on back of the rupee strengthening to Rs101 against the US dollar in the open market. However, the finance minister’s earlier claim, which he made last year that the dollar would be brought down to Rs98, still
Meanwhile, the amount transferred in the PDF was $300 million higher than what Pakistan had requested the International Monetary Fund (IMF) over and above the $6.7-billion bailout package aimed at building the foreign currency reserves.
During his visit to the US, Dar had requested the Deputy Managing Director of the IMF to augment the three-year Extended Fund Facility by approving another $1.2 billion. The Deputy Managing Director had promised to positively review the request subject to successful completion of the second review.
Both sides have already completed the second review last month and the IMF’s Executive Board is expected to approve the third loan tranche of $550 million before end of March.
According to analysts, this time the IMF was more interested in recovering its money than providing major bailouts to the beleaguered economic team. They added that changing ground realities in light of Washington’s likely withdrawal of forces from Afghanistan was one of the reasons behind the IMF’s reluctance to offer big bailouts.
After IMF’s refusal, coupled with reluctance shown by other two chief international lenders of the country in disbursing the promised loans, Pakistan’s official foreign currency reserves position remained precarious. However, the situation has started improving after the PDF started ballooning.
The PDF is the brainchild of Finance Minister Dar, who played a key role in convincing these countries to contribute, according to sources.
Separately, the Finance Minister urged on Monday Thomas Williams, Charge’d Affairs of the US embassy, to expedite reimbursements to Pakistan on account of the CSF. The CSF disbarments are part of the government’s plan to increase the foreign currency reserves to $16 billion by end of the year.
Published in The Express Tribune, March 11th, 2014.