Tag: international finance

  • Uncertainty surrounds Pakistan’s $7 billion IMF bailout as approval date still not confirmed

    Uncertainty surrounds Pakistan’s $7 billion IMF bailout as approval date still not confirmed

    Pakistan’s much-anticipated $7 billion bailout package has not yet been scheduled for review by the International Monetary Fund (IMF) executive board, with the agenda extending only until August 30, according to the IMF’s recently released calendar.

    In July, Pakistani authorities and the IMF reached a staff-level agreement, potentially paving the way for a 37-month Extended Fund Facility (EFF) valued at SDR 5,320 million (approximately $7 billion).

    However, this agreement hinges on the approval of the IMF Executive Board, which is contingent upon Pakistan securing necessary financing assurances from its development and bilateral partners.

    The proposed programme is designed to build on the hard-won macroeconomic stability achieved in the past year. It aims to strengthen public finances, reduce inflation, rebuild external reserves, and eliminate economic distortions to foster private sector-led growth.

    Despite five weeks having passed since the staff-level agreement, Pakistan has yet to bridge an external financing gap of up to $5 billion.

    This delay has prevented the country from signing the Letter of Intent (LoI) required to formally request the IMF executive board’s approval of the $7 billion package under the EFF programme.

    The LoI is a critical step in requesting the IMF’s endorsement of the 37-month, $7 billion EFF programme. Without this approval, Pakistan cannot proceed with the much-needed financial support.

  • Pakistan aims for more than $6 billion IMF bailout, targets agreement this month

    Pakistan aims for more than $6 billion IMF bailout, targets agreement this month

    Pakistan is on track to finalise a staff-level agreement with the International Monetary Fund (IMF) for a bailout exceeding $6 billion by the end of this month, announced Junior Finance Minister Ali Pervaiz Malik on Wednesday.

    The country, grappling with escalating domestic dissent over new tax measures, has set ambitious revenue targets in its latest budget, aimed at securing IMF approval to avert an economic crisis.

    “We hope to conclude this IMF process within the next three to four weeks,” Malik stated, highlighting the urgency to reach a staff-level agreement before the IMF board’s recess. While estimating the bailout package to exceed $6 billion, Malik underscored that the IMF’s endorsement remains paramount at this juncture.

    Pakistan’s fiscal blueprint for the fiscal year starting July 1 includes a daunting tax revenue target of 13 trillion rupees ($47 billion), marking a nearly 40 per cent surge from the previous year.

    Concurrently, the government aims to slash the fiscal deficit to 5.9 per cent of the Gross Domestic Product (GDP) from 7.4 per cent in the preceding year.

    Malik defended the stringent budgetary measures, asserting that they were essential to pave the way for an IMF programme, which he claimed the lender had acknowledged positively during discussions. However, the anticipated budget approval from the IMF could exacerbate public discontent, analysts warn.

    “While these budget reforms may strain the local economy, the IMF programme prioritises economic stabilisation,” Malik affirmed.

    Economist Sakib Sherani, from the private firm Macro Economic Insights, highlighted the urgency of sealing a swift deal with the IMF to mitigate pressure on Pakistan’s foreign exchange reserves and currency, given impending debt repayments and the unwinding effects of earlier capital and import controls.

    “If delays persist, the central bank may need to temporarily reinstate import and capital controls, leading to a period of uncertainty with potential implications for equity markets,” Sherani cautioned.

    In conclusion, Pakistan’s pursuit of an IMF bailout underscores its efforts to stabilise its economy amidst mounting challenges, balancing economic imperatives with public sentiment.

  • Overseas workers’ remittances surge to $3 billion in March

    Overseas workers’ remittances surge to $3 billion in March

    In March 2024, Pakistan witnessed a significant surge in the influx of overseas workers’ remittances, reaching a notable milestone of $3 billion.

    This remarkable figure reflects a remarkable 31.3 per cent increase on a month-on-month basis compared to February 2024, when the remittances stood at $2.25 billion.

    The latest data released by the State Bank of Pakistan (SBP) unveiled this positive trend, highlighting the pivotal role remittances play in Pakistan’s economic landscape.

    Year-on-year comparisons also underscored the upward trajectory, with a 16.4 per cent increase noted in March 2024 compared to the same month in the previous year, when remittances amounted to $2.54 billion.

    Such consistent growth in remittances holds significance beyond mere monetary figures, as these funds contribute substantially to bolstering the country’s external account and fueling economic activity.

    Moreover, they serve as a crucial supplement to the disposable incomes of remittance-dependent households, enhancing their financial resilience.

    In a broader fiscal context, the first nine months of Fiscal Year 2024 witnessed a steady rise in workers’ remittances, totaling $21.0 billion.

    This marks a modest 0.9 per cent increase compared to the corresponding period in the previous fiscal year, where remittances amounted to $20.8 billion.

    Such stability and growth in remittances underscore the resilience of Pakistan’s overseas workforce and their commitment to supporting their families and homeland.

    Breaking down the sources of these remittances, Overseas Pakistanis in Saudi Arabia emerged as leading contributors, with remittances totaling $703.1 million in March 2024.

    This represents a substantial 30 per cent increase compared to the previous month and a noteworthy 24 per cent increase year-on-year.

    Similarly, remittances from the United Arab Emirates (UAE) witnessed a remarkable surge, jumping by 43 per cent on a monthly basis to reach $548 million in March, reflecting a 34 per cent increase compared to the same period last year.

    The United Kingdom also played a significant role in this surge, with remittances soaring to $462 million in March 2024, marking a notable 33 per cent increase compared to February 2024.

    Meanwhile, remittances from the European Union exhibited a robust 19 per cent monthly growth and a 6 per cent year-on-year improvement, amounting to $315 million in March 2024.

    Overseas Pakistanis in the United States also contributed significantly, send`ing $373 million in March 2024, reflecting an 18 per cent increase compared to the previous year and a substantial 30 per cent increase month-on-month.

  • Pakistan may enter fresh IMF loan programme, stricter conditions expected

    Pakistan may enter fresh IMF loan programme, stricter conditions expected

    In the wake of the completion of its current loan programme, Pakistan is poised to sign a new loan agreement with the International Monetary Fund (IMF), reports indicate. 

    The forthcoming Extended Fund Facility programme, anticipated to span three years, will see Islamabad share budget proposals for FY 2024–25 with the IMF. 

    Sources suggest that before finalising the agreement, Pakistan will provide assurances to the IMF regarding further increases in electricity and gas prices, as well as a commitment to reduce subsidies. 

    Finance ministry sources have disclosed that the conditions for the new loan programme are expected to be more stringent compared to the current Standby Agreement (SBA) programme. 

    Earlier discussions hinted at Pakistan securing another loan package from the IMF following the conclusion of the ongoing standby agreement. 

    The caretaker government has commenced consultations for the upcoming IMF programme, with talks expected to commence this month. 

    Officials from the finance ministry have indicated that the measures initiated by the caretaker government will be continued by the elected government in discussions with the IMF.

  • SBP reports 26% increase in overseas workers’ remittances

    SBP reports 26% increase in overseas workers’ remittances

    In January 2024, Pakistan witnessed a notable increase in the inflow of overseas workers’ remittances, reaching $2.4 billion, as revealed by data released by the State Bank of Pakistan (SBP) on Monday. This marks a 1 per cent rise compared to December 2023, where remittances stood at $2.38 billion.

    Year-on-year analysis underscores a substantial surge, with a 26 per cent increase from the same period last year, when remittances totaled $1.9 billion in January.

    The significance of these remittances cannot be understated, as they play a pivotal role in bolstering Pakistan’s external account and fueling economic activity. Additionally, they serve as a vital supplement to the disposable incomes of households dependent on remittances.

    Despite the uptick in January, the cumulative figure for July-January FY24 reflects a 3 per cent decline year-on-year, amounting to $15.83 billion, down by $386 million from the $16.32 billion recorded in the same period of FY23.

    Breaking down the sources of remittances, overseas Pakistanis in Saudi Arabia retained their leading position, contributing $587.3 million in January 2024. This marked a 2 per cent increase from the previous month and a substantial 43 per cent rise from the corresponding period last year.

    Remittances from the United Arab Emirates (UAE) experienced a slight dip of 3 per cent month-on-month, decreasing from $419.2 million in December to $407.6 million in January. However, the yearly comparison reveals a remarkable surge of nearly 51 per cent.

    The United Kingdom witnessed a marginal decline in remittances, with $362.1 million recorded in January, down by 2 per cent from December 2023.

    In contrast, remittances from the European Union saw a significant 20 per cent year-on-year increase and a 2 per cent monthly rise, totaling $290.1 million in January 2024.

    Meanwhile, overseas Pakistanis in the United States contributed $283.4 million in January 2024, marking a notable 32 per cent increase from the same period last year.

    The consistent flow of remittances, despite fluctuations in individual sources, underscores their enduring importance to Pakistan’s economy and the livelihoods of millions of households reliant on them.

  • Pakistan expected to increase petroleum levy to get IMF loan 

    Pakistan expected to increase petroleum levy to get IMF loan 

    Pakistan has reportedly provided assurances to the International Monetary Fund (IMF) regarding an augmentation of the petroleum levy in the fiscal year 2024–25, aligning with its intentions to embark on a new loan programme. 

    According to documentation cited by sources within the finance ministry, Pakistan has committed to elevating the petroleum levy to Rs1,065 billion in FY2024–25, anticipating a revision of the current levy target from Rs869 billion to Rs918 billion.  

    The attainment of the revised target is contingent upon an uptick in the consumption of petroleum products. 

    The sources additionally revealed that the caretaker government would have implemented a Presidential Ordinance if adjustments were to be made to the current petroleum levy target. 

    Earlier revelations indicate that Pakistan is poised to secure another financial assistance package from the International Monetary Fund (IMF) subsequent to the conclusion of the existing standby agreement. 

    The caretaker government has initiated consultations in preparation for the forthcoming IMF programme. 

    Sources have indicated that talks between the government and the IMF for the new loan programme are likely to commence this month.  

    Finance ministry officials underscored the commitment of the elected government to advance the measures established by the caretaker government. 

  • IMF board’s January meeting to shape future disbursements for Pakistan

    IMF board’s January meeting to shape future disbursements for Pakistan

    The International Monetary Fund’s (IMF) Executive Board is scheduled to convene on January 11 to endorse the Staff-Level Agreement (SLA) with Pakistan, marking the inaugural review of the $3 billion Stand-By Arrangement (SBA).

    In June, the IMF Executive Board granted approval for a crucial nine-month arrangement with Pakistan, aimed at supporting its economic stabilisation programme.

    This approval facilitated an immediate disbursement of $1.2 billion, with the remaining funds to be disbursed over the programme’s timeline, contingent upon two quarterly evaluations.

    Following negotiations between IMF staff and Pakistani authorities on November 15 in Islamabad, the SLA was successfully reached, paving the way for Pakistan to access SDR 528 million (approximately $700 million).

    This latest disbursement brings the cumulative total under the nine-month $3 billion SBA to nearly $1.9 billion.

    While the initial plan had tentatively slated the IMF Board meeting for December 7 to approve the initial tranche, the confirmed date is now set for January 11.

  • Pakistani rupee declines by 48 paisa, closing at Rs280.57 against US dollar

    Pakistani rupee declines by 48 paisa, closing at Rs280.57 against US dollar

    In the financial markets this week, the Pakistani rupee (PKR) experienced a depreciation of 1.78 rupees against the US dollar (USD), closing the week’s trade at PKR 280.57.

    This marks a significant shift from the previous week’s closing rate of PKR 278.8 per USD.

    During today’s trading session, the local currency saw a decline of 48.1 paisa. The intraday high (bid) was recorded at Rs280.5, while the low (ask) reached Rs280.15 against the US dollar.

    In the open market, exchange companies quoted the US dollar at Rs279.5 for buying and Rs292.8 for selling, indicating a loss of 50 paisa compared to the previous closing rates of Rs279 for buying and Rs282 for selling.

    This decline against the US dollar signifies the second consecutive weekly decrease for the Pakistani rupee. In comparison to other major currencies, the PKR experienced fluctuations as well.

    Against the Euro, the PKR depreciated by 64.78 paisa, closing at Rs296.17 compared to the previous value of Rs295.53.

    The British Pound became more expensive by 1.21 rupees, closing at Rs339.94 in contrast to Rs338.73 from the previous day.

    PKR lost 0.69 paisa against the Japanese yen, closing at Rs1.869 versus Rs1.862 the previous day.

    The UAE dirham also increased in value by 12.89 paisa from Rs76.257 to Rs76.386.

    It’s noteworthy that during the current financial year, the PKR has appreciated against the dollar by Rs5.42, or 1.93 per cent.

    However, in the current calendar year, PKR has depreciated by 54.14 rupees, or 19.3 per cent.

    This dynamic market movement reflects the ongoing economic fluctuations in the country.

  • Pakistani rupee claims top spot as best-performing currency worldwide 

    Pakistani rupee claims top spot as best-performing currency worldwide 

    Amidst a determined crackdown on smuggling and illegal financial activities, the Pakistani rupee has emerged as the world’s top-performing currency for September. During this remarkable month, the rupee’s value surged from Rs305.54 against the US dollar on August 31st to Rs287.74 on September 28th, a notable increase of Rs17.8 or 6.2 per cent.

    Impressively, this positive trend persisted for 17 consecutive trading sessions, resulting in an overall gain of nearly 7 per cent since hitting its lowest point at 307.1 on September 5th. 

    It’s essential to note that the currency market was closed on Friday, September 29th. In terms of global currency performance, the Mauritian rupee secured the second position with a modest appreciation of 0.7 per cent, while the Hong Kong dollar claimed third place, showing a slight improvement of 0.2 per cent throughout September. These figures are based on data from the brokerage house Arif Habib Limited (AHL), reported on a recent Friday. 

    Financial experts attribute this remarkable rupee surge to a series of government measures aimed at curbing dollar smuggling and currency hoarding. Additionally, during the same month, the State Bank of Pakistan (SBP) introduced structural reforms targeting the Exchange Companies (ECs) sector. These reforms included a directive for commercial banks to establish their own ECs as wholly-owned subsidiaries and an increase in the minimum capital requirement for ECs from Rs200 million to Rs500 million. 

    Notably, the Pakistani rupee recorded substantial gains in the inter-bank market, appreciating by 6-9 per cent against three major currencies – the US dollar, UK Pound, and Euro – over the past few weeks. Even in the open market, the rupee showed a significant upswing of 11-13 per cent, effectively eliminating the premium associated with the open-market rate. This is particularly impressive given that the US Dollar index reached a 10-month high. 

    This strengthening of the rupee aligns with the commitment made by Pakistani authorities in July when they entered into a vital $3 billion Stand-By Arrangement (SBA) with the International Monetary Fund (IMF). This agreement was pivotal in averting a potential sovereign default and required the adoption of a market-based exchange rate, which has now proven to be a pivotal factor in the rupee’s impressive resurgence. 

  • Will Pakistan secure IMF’s bailout? Decision expected within 48 hours

    Will Pakistan secure IMF’s bailout? Decision expected within 48 hours

    Prime Minister Shehbaz Sharif engaged in a telephonic conversation with Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), on Tuesday.

    During the discussion, Prime Minister Shehbaz Sharif expressed his optimistic outlook, anticipating that a decision regarding the bailout programme would be reached within the next day or two.

    In an official statement issued by the Prime Minister’s Office (PMO), it was highlighted that the premier and IMF MD delved into various matters pertaining to the IMF programme. The statement further indicated that the efforts of the finance minister and his team were duly acknowledged by the IMF MD.

    The statement continued to convey the Prime Minister’s expectation that the coordination efforts on finer details would culminate in an IMF decision in the coming days. Additionally, Shehbaz reiterated his commitment to achieving the shared goal of improving the economic situation through collaborative endeavors.

    Last week, Prime Minister Shehbaz Sharif held a meeting with Georgieva during the Summit for a New Global Financial Pact in Paris, wherein he provided a comprehensive briefing on Pakistan’s economic outlook. The Prime Minister expressed hope that the critical funds would be disbursed as a result.

    Pakistan is currently engaged in a race against time to revive its halted bailout programme, which is set to conclude on June 30. Experts emphasise the significance of resuming the IMF bailout, which has been at a standstill since November of the previous year.

    The cash-strapped South Asian economy is grappling with a balance of payment crisis, making the expected funding of $1.1 billion from the international lender crucial. This funding would also pave the way for additional inflows from Pakistan’s multilateral and bilateral partners, effectively reducing the risks associated with a potential default, as per expert opinion.