Tag: International Monetary Fund

  • IMF loan delay continues to impact Pakistani rupee

    IMF loan delay continues to impact Pakistani rupee

    During trading on Wednesday, the Pakistani rupee experienced a slight decrease against the US dollar, with a depreciation of almost 0.06 per cent in the inter-bank market. At around 12:45 pm, the currency was being traded at Rs284.06, which is a decline of Re0.16.

    This comes after the rupee had previously regained some ground against the US dollar on Tuesday, settling at Rs283.9 in the inter-bank market. The International Monetary Fund (IMF) Extended Fund Facility (EFF) has been stalled since last year, and market participants are waiting for its resumption.

    Experts have suggested that the reduced demand for US dollars can be attributed to the increase in inflows from workers’ remittances and a decline in import payments. Globally, the dollar saw some stability on Wednesday after being influenced by bond market volatility. Investors closely monitored US economic indicators, Federal Reserve commentary, and corporate earnings for indications about the path for interest rates.

    The dollar index, which measures the greenback against six major peers, rose by 0.11 per cent to 101.83 in Asian trading, following a 0.36 per cent decline on Tuesday that reversed the 0.54 per cent increase from the previous session.

    Oil prices, which serve as a significant indicator of currency parity, declined on Wednesday as the market considered potential interest rate hikes from the Federal Reserve. Such hikes could slow growth and dampen oil consumption, offsetting the impact of falling US inventories and strong Chinese economic data.

  • Pakistan shares plan with IMF to bridge $3 billion financing gap

    Pakistan shares plan with IMF to bridge $3 billion financing gap

    The coalition government of Pakistan has revealed its plan to the International Monetary Fund (IMF) for obtaining an additional $3 billion to fill the financing gap as it tries to persuade the lender to release the next loan tranche.

    In order to conclude talks with Pakistan regarding its delayed bailout, the IMF required “necessary” financing guarantees as soon as possible. Pakistan was asked to raise $6 billion in external financing, which is required by the country until June to avoid a potential default.

    This figure was determined on the assumption that the current account deficit would remain at around $7 billion in the current fiscal year. The IMF welcomed the recent announcement of financial support from key bilateral partners, but this support is inadequate for Pakistan’s requirements.

    Islamabad informed the IMF about its plan to secure a $450 million second Resilient Institutions for Sustainable Economy (RISE-II) budget support loan, as well as its plans to obtain $1 billion from the Asian Infrastructure Investment Bank (AIIB) and other commercial banks, and to materialise pledges made at the Geneva moot. According to sources, once the staff-level agreement is signed with the IMF, it will become easier for Pakistan to obtain financing.

    Pakistan’s foreign exchange reserves have fallen to cover barely a month of imports following the stall in IMF funding in November, which was later complicated by snags over fiscal policy adjustments after officials from the lender visited Islamabad for talks in February. The fiscal policy adjustments were part of the ninth review exercise on a bailout package agreed upon in 2019, whose resumption is crucial for Pakistan to avoid the risk of defaulting on external payment obligations.

    Pakistan will receive another disbursement of more than $1 billion from the IMF programme before it ends in June, which will unlock other bilateral and multilateral financings for the country, helping to ease its financial difficulties.

    Programme loans from other multilateral agencies await completion of the IMF review, as reported by central bank governor Jameel Ahmad during the spring meetings of the lender and the World Bank in Washington.

  • Pakistan’s sustainable policy framework crucial to avoid default risk, says IMF

    Pakistan’s sustainable policy framework crucial to avoid default risk, says IMF

    Whilst serving as Finance Minister, Ishaq Dar has repeatedly assured the public that Pakistan has not defaulted and will not do so in the future. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), has endorsed Dar’s views and stated that Pakistan has not yet reached the level of default.

    Speaking at a news conference during the spring meeting of Breton Wood Institutions at the Fund’s headquarters in Washington, Georgieva said that the Fund was seeking confirmation from international partners to meet Pakistan’s financing gap requirements. Responding to a question about Pakistan’s looming default risk, she stated that the country had not yet reached that level, but required a sustainable policy framework to avert such risks.

    Georgieva emphasized that the lender has been working closely with the authorities in Pakistan, within the context of the current programme, to ensure that the country has the policy framework in place to prevent reaching the point of unsustainable debt. Pakistan has less than a month’s worth of foreign exchange reserves and is awaiting a $1.1 billion bailout package from the IMF that has been delayed since November due to issues related to fiscal policy adjustments.

    Georgieva expressed hope that, with the goodwill of all parties involved and the implementation of what has already been agreed upon by the Pakistan authorities, the current programme can be completed successfully. Islamabad is required to provide assurance that its balance of payments deficit is fully financed for the fiscal year ending in June in order to unlock the next tranche of IMF funding.

    During the IMF-World Bank spring meetings, Dar attended via Zoom from Islamabad with IMF Deputy Managing Director Antoinette Moniso Sayeh. Sources report that Sayeh stated that Pakistan has yet to meet its external financing gap of $6 billion, of which $3 billion would need to be financed before striking a staff-level agreement.

    At this point, the State Bank of Pakistan’s Jameel Ahmed, who is presently in Washington, reportedly told participants that the United Arab Emirates (UAE) had shared a draft agreement for the provision of an additional $1 billion deposit to meet the requirement for signing the staff-level agreement. A top official expressed hope that the UAE deposit would be confirmed shortly and suggested that it may be confirmed as early as next week.

    Regarding the cross-fuel subsidy, the IMF was informed that it was only an idea floated by a relevant ministry and would be implemented only after an agreement on the salient features of the scheme. The Pakistani authorities agreed with the IMF that the scheme appeared good on paper but its transparent implementation would be challenging.

  • Pakistan to receive written guarantee from UAE for $1 billion loan

    Pakistan to receive written guarantee from UAE for $1 billion loan

    Pakistan is making progress towards securing a loan from the International Monetary Fund (IMF) with a $1 billion financing pledge from the United Arab Emirates (UAE) expected this week. Sources suggest that the UAE will provide written confirmation of the financing to the IMF through the Finance Secretary during the current annual meeting in Washington.

    To secure external financing for this fiscal year, the IMF has asked Pakistan to seek assurances from friendly countries and multilateral partners for funding its balance of payment gap. In addition to Saudi Arabia’s $2 billion pledge, the agreement with the IMF is also contingent on the UAE’s $1 billion commitment.

    According to sources within the Ministry of Finance, the UAE has finalised the agreement, and as soon as Pakistan receives a written guarantee from the Gulf state, the IMF will also be informed. This development follows requests from Pakistan’s Prime Minister and Finance Minister to UAE officials to complete the necessary prerequisites for the Fund.

    Pakistan is currently facing one of the most severe economic crises in its history, with consumer prices at a record high and interest rates raised to an all-time high. Due to a dollar shortage, the IMF has revised its growth forecast for Pakistan to 0.5% from the earlier estimate of 2%, causing supply chain disruptions and companies to halt production.

    The IMF is also assessing the coalition government’s proposed fuel discount for lower-income groups, which is planned to be financed by raising fuel prices for wealthier motorists. The finance minister has assured that the IMF has received all the required information.

    The finance minister had cancelled his scheduled in-person meetings with IMF officials in Washington but has repeatedly claimed that the staff-level agreement with the lender would be reached soon. Islamabad has been hosting an IMF mission since January to negotiate policy measures and secure $1.1 billion in funding for the cash-strapped economy, which is on the verge of collapse.

    The funds are part of a $6.5 billion bailout package approved by the IMF in 2019, which analysts argue is crucial for Pakistan to avoid defaulting on external payment obligations. The deal will also unlock other financing options to shore up Pakistan’s foreign exchange reserves, which have fallen to four weeks’ worth of import cover and help resolve the balance of payment crisis.

  • Gold price hits new record high of Rs218,300 per tola as Pakistani rupee crashes

    Gold price hits new record high of Rs218,300 per tola as Pakistani rupee crashes

    The price of gold in Pakistan has surged to an all-time high, surpassing the Rs218,000 mark, as the country’s local currency slumped to a historic low against the US dollar. The All-Pakistan Sarafa Gems and Jewellers Association (APSGJA) has released data showing that the price of gold (24 carats) rose by Rs600 per tola and Rs514 per 10 grammes, settling at Rs218,300 and Rs187,157, respectively.

    The rise in the price of the yellow metal was in line with the movement of the rupee, which fell Rs1.34 or 0.46 per cent to Rs288.43 against the US dollar in the interbank market, and an increase in weekly inflation. Weekly inflation rose 0.92 per cent week-on-week and 44.49 per cent year-on-year during the seven-day period ending on April 6, as the prices of sugar and chicken surged due to Ramadan and likely hoarding.

    Gold is often seen as a hedge against inflation and its value increases as the purchasing power of the dollar declines, as well as due to seasonal demand during the holy month of Ramadan. During the week, investors’ attention shifted towards the precious metal as economic tensions continue to rise amid the International Monetary Fund (IMF) reviewing external financing commitments from friendly countries before it releases bailout funds. According to Geo, the delay in the revival of the programme has had a negative impact on the currency market, which in turn is bolstering demand for gold.

    The APSGJA also mentioned that the price of gold in Pakistan is Rs5,000 per tola “undercost” as compared to the Dubai market, indicating that the Pakistani gold market is currently cheaper than the global market.

    Meanwhile, silver prices in the domestic market have also surged to historic highs, with an increase of Rs40 per tola and Rs34.30 per 10 grams, settling at Rs2,520 and Rs2,160.5, respectively. In the international market, the price of gold dropped by $1 per ounce, settling at $2,001.

  • Pakistani rupee falls to historic low of Rs288.43 against dollar

    Pakistani rupee falls to historic low of Rs288.43 against dollar

    On Wednesday, the Pakistani rupee (PKR) reached a new record low, falling to Rs288.43 against the US dollar in the interbank market.

    The State Bank of Pakistan (SBP) reported that the rupee slid by Rs1.34 against the greenback before closing at Rs288.43. Meanwhile, the Forex Association of Pakistan (FAP) has reported that the selling rate of the dollar in the open market was recorded at Rs295.

    This comes after the rupee had closed at Rs287.09 per US dollar the day before, with the greenback trading at over Rs291 in the open market. Additionally, on April 5, the rupee had closed at Rs287.85 per US dollar, while the greenback was trading at over Rs293 in the open market.

    Experts suggest that the drop in the rupee’s value can be attributed to various factors such as economic challenges, political uncertainty, and depleting foreign exchange reserves.

    It is worth noting that a staff-level agreement between the International Monetary Fund (IMF) and Pakistan was scheduled to take place on February 9.

  • Ishaq Dar cancels trip to the US for IMF and World Bank spring meetings

    Ishaq Dar cancels trip to the US for IMF and World Bank spring meetings

    Finance Minister, Ishaq Dar, has cancelled his scheduled trip to the United States next week to meet with the International Monetary Fund (IMF) and World Bank. The reason cited for the pull-out is the “domestic state of affairs” in the country, as the deepening political uncertainty has made it difficult for Dar to attend the World Bank-IMF spring meetings that were supposed to take place in Washington from April 10 to 16.

    Dar’s original plan was to address concerns about the government’s continuity, future economic plans, and bridging the trust deficit with multilateral lenders. However, with his withdrawal, the Minister of Economic Affairs, Sardar Ayaz Sadiq, will also not travel to the United States. The government will now be represented by Finance Secretary Hamed Yaqoob Sheikh and Economic Affairs Secretary Kazim Niaz at the WB-IMF spring meetings.

    The decision by the finance minister to withdraw may also result in the cancellation of meetings with his Saudi Arabian counterpart and the UK state minister for development. Dar was supposed to begin his trip on Monday with a meeting with Nathan Porter, the IMF’s Mission Chief in Pakistan, which was critical as Pakistan and the IMF were no longer actively negotiating following the government’s decision to announce petrol subsidies.

    Besides the IMF and WB, Dar was scheduled to meet with representatives from the three international credit rating agencies that had downgraded Pakistan. The finance ministry had also scheduled meetings with foreign commercial banks to persuade them to release loans.

    However, the Pakistan delegation may still get to meet with IMF’s deputy managing director Antoinette Sayeh, who follows Pakistan closely. It is uncertain whether a meeting with Managing Director Kristalina Georgieva would take place or not. Some reports have cited diplomatic protocol issues that prevent low-ranking dignitaries from meeting presidents/directors/leaders of various multilateral institutions and finance ministers from various countries.

  • Pakistan’s hopes for IMF agreement rise as Saudi Arabia confirms $2 billion in additional deposits

    Pakistan’s hopes for IMF agreement rise as Saudi Arabia confirms $2 billion in additional deposits

    The International Monetary Fund (IMF) has informed Pakistan that Saudi Arabia has confirmed $2 billion in additional deposits, which has rekindled hopes of an early agreement signing. Since January, Islamabad has been negotiating with the IMF for the release of $1.1 billion from a $6.5 billion bailout package that was agreed upon in 2019.

    To unlock the funding, the Pakistani government has cut back on subsidies, removed an artificial cap on the exchange rate, added taxes, and raised fuel prices. However, assurances from friendly nations for additional funds have delayed the agreement.

    The lender has informed Pakistani authorities of the development and the Fund staff is reportedly satisfied with the latest confirmation. The report states that the Saudi authorities are set to make a public announcement, possibly during the upcoming visit of Prime Minister Shehbaz Sharif to the kingdom.

    The Saudi envoy in Pakistan had also hinted in a recent interview that his country had always supported Pakistan in critical situations and that good news would be shared soon. The sources have stated that all eyes are focused on the UAE for getting confirmation on another $1 billion deposit from them, which may pave the way for striking the staff-level agreement (SLA) with the IMF.

    Finance Minister Ishaq Dar is expected to visit UAE on his way to the US where he will hold talks on the release of funds. However, there is still another stumbling block in the way of signing the SLA with the IMF. The Ministry of Petroleum, in consultation with the PM Office, had announced an unplanned cross-fuel subsidy for owners of motorcycles and cars up to 800cc, which needs to be scrapped at this stage.

    The government has not yet withdrawn the proposed cross-fuel subsidy, which cannot be implemented in a half-baked manner. Such schemes were considered in the past during the tenure of former finance minister Shaukat Tarin and even during the era of the PDM-led government when Miftah Ismail had the charge of the Ministry of Finance.

    Even Miftah Ismail had allocated Rs48 billion on the eve of the last budget in the name of Sasta Petrol, but it could not be implemented because such schemes could not be designed properly. The announcement of a half-baked cross-fuel subsidy had provided an excuse to the IMF for delaying the SLA signing, as they were still raising questions for getting more details to ascertain how the scheme was going to be implemented in a transparent manner.

  • Ishaq Dar to attend IMF, World Bank meetings in US

    Ishaq Dar to attend IMF, World Bank meetings in US

    Finance Minister of Pakistan, Ishaq Dar, will lead a delegation to the United States to attend the annual spring meeting of the Breton Wood Institutions (BWIs), comprising the International Monetary Fund (IMF) and World Bank, from April 10 to 16.

    The delegation includes officials from the Finance and Economic Affairs Division and the State Bank of Pakistan (SBP) governor. The delegation is expected to present new proposals to the IMF and World Bank for the provision of dollar inflows.

    IMF and Pakistan will also discuss the possibility of combining the remaining 10th and 11th reviews under the Extended Fund Facility (EFF) program, worth $6.5 billion, if the pending 9th review is completed. The EFF program, signed in 2019, is set to expire on June 30, 2023, and cannot be extended beyond the deadline.

    The delay in the 9th Review’s completion, scheduled for December 2022, has resulted in the delay of the 10th Review, which was to start in February 2023. The 11th Review was scheduled to begin on May 3. The delay in the 9th Review will increase the cost of correcting the situation.

    The government of Pakistan has taken difficult decisions to revive the IMF program, but there is no easy solution to the country’s ailing economy. The IMF is seeking verification from Pakistan’s bilateral friends, including Saudi Arabia, the UAE, and Qatar, to provide additional assistance of $6 billion until the end of June 2023.

    SBP’s foreign exchange reserves currently stand at $4.2 billion, which is insufficient to meet obligations related to foreign debt servicing, including principal and markup. It remains to be seen how the completion of the bailout program will proceed, given the delay in the 10th Review.

  • Pakistan awaits financial support confirmation from Saudi Arabia and UAE to sign IMF agreement

    Pakistan awaits financial support confirmation from Saudi Arabia and UAE to sign IMF agreement

    The signing of the staff-level agreement (SLA) between Pakistan and the International Monetary Fund (IMF) is dependent on confirmation of financial support from the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE). Once support confirmation is received from KSA and UAE, the SLA will be signed with the IMF.

    Finance Minister Ishaq Dar reportedly informed diplomats in Islamabad at an Iftar dinner on Sunday that the issues with the IMF will be settled soon. However, it has been 46 days since the IMF and Pakistan concluded review talks in Islamabad on February 9, and the staff-level agreement is yet to be secured.

    There have also been dissenting views within the Finance Ministry on the issue of cross-fuel subsidy. While some bureaucrats from the ministry have opposed the scheme, the government went public with it, which has caused concern.

    Officials who spoke on the condition of anonymity told The News, that such schemes would jeopardize the revival of the IMF program, and it remains to be seen how the ministry will satisfy the global lender on the subsidy. The status of the 10th and 11th reviews, which were due on February 3 and May 3, respectively, is also unknown at this time, even if the IMF program is revived.

    The situation highlights the importance of financial support from KSA and UAE to Pakistan, as well as the potential impact of domestic policy decisions on the country’s relationship with the IMF. Despite Finance Minister Dar’s assurances, it is unclear when the SLA will be signed, and how the subsidy issue will be resolved.

    As the reviews remain in question, the situation underscores the need for Pakistan to address economic challenges and seek support from its allies to maintain its financial stability.