Tag: loan tranche

  • Pakistan to receive $1.5 billion from international lenders following IMF approval

    Pakistan to receive $1.5 billion from international lenders following IMF approval

    Pakistan is poised to secure funds amounting to $1.5 billion from global lenders, contingent on the approval of the loan tranche under the $3 billion Stand-By Arrangement (SBA) by the International Monetary Fund (IMF), as highlighted by Dr Shamshad Akhtar, the caretaker finance minister, in a recent interview with a local news channel.

    It’s noteworthy that the IMF granted preliminary approval on November 15, 2023, for the disbursement of the upcoming loan tranche within the programme.

    Upon receiving approval, Pakistan will gain access to SDR 528 million, equivalent to approximately $700 million. This will contribute to the cumulative disbursements under the program reaching almost $1.9 billion.

    The agreement underscores the authorities’ commitment to advancing planned fiscal consolidation, expediting cost-reducing reforms in the energy sector, completing the transition to a market-determined exchange rate, and pursuing reforms in state-owned enterprises and governance.

    These measures aim to attract investment, support job creation, and simultaneously enhance social assistance.

    Nathan Porter remarked, “Anchored by the stabilization policies under the SBA, a nascent recovery is underway, supported by international partners and indications of improved confidence.”

    He added that the steadfast execution of the FY24 budget, ongoing adjustments of energy prices, and renewed inflows into the foreign exchange (FX) market have alleviated fiscal and external pressures.

  • Pakistan’s forex reserves dip by $79 million amidst external debt repayments

    Pakistan’s forex reserves dip by $79 million amidst external debt repayments

    Pakistan’s total liquid foreign exchange reserves declined by $79 million in the past week, primarily due to external debt repayments. 

    According to the State Bank of Pakistan (SBP), as of November 10, 2023, the country’s total reserves amounted to $12.535 billion, down from $12.614 billion on November 3, 2023.

    During the reviewed week, SBP’s reserves decreased by $115 million to $7.397 billion due to debt servicing. Conversely, commercial banks’ net foreign reserves increased by $36 million, reaching $5.139 billion by the end of the week.

    In a significant development, the International Monetary Fund (IMF) announced on Wednesday that a staff-level agreement (SLA) has been reached on the first review of a nine-month stand-by arrangement (SBA) totaling $3 billion with Pakistani authorities.

    Pending approval by the IMF Executive Board, the SLA signifies a milestone, and upon approval, an amount of SDR 528 million, approximately a $700 million loan tranche, will be disbursed to Pakistan. 

    This disbursement will bring the total funds received under the IMF SBA to $1.9 billion.

    These incoming funds are expected to contribute to replenishing the country’s diminishing foreign exchange reserves. 

    The IMF team, led by Nathan Porter, conducted discussions in Pakistan from November 2–15, 2023, culminating in the announcement of the SLA upon the completion of the economic review.

  • IMF pressures Pakistan for tax reforms, calls for intensified recovery efforts

    IMF pressures Pakistan for tax reforms, calls for intensified recovery efforts

    The International Monetary Fund (IMF) is urging Pakistan to intensify efforts towards tax recovery. 

    Specifically, the IMF calls for increased income tax collection from retailers and the real estate sector, alongside a heightened focus on agriculture income. 

    The IMF emphasises collaborative actions between the federal government and provinces to enhance tax recovery, considering the imposition of a fixed tax on retailers in case of collection shortfalls after December. 

    Additionally, the IMF recommends consultations with provinces for taxing agriculture and real estate. Proposals for tax policy amendments and addressing taxation flaws have been extended to the Federal Board of Revenue (FBR) by the IMF mission, emphasising effective taxation policies and enforcement in sectors with insufficient tax recovery. 

    The FBR has presented a revenue projection report to the IMF team for the current fiscal year, with the IMF expected to respond by Saturday. During the discussions, the FBR briefed the IMF on the task force dedicated to tax policy and administration. 

    As part of an agreement with the IMF, Pakistan commits to sharing data on tax evaders through collaboration with the FBR, banks, and NADRA, aiming to enhance overall tax collection. 

    This agreement was reportedly reached during policy review talks, facilitating the release of a $700 million loan tranche under the Standby Agreement (SBA).

  • Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    In a challenging turn of events for Pakistan’s economy, the foreign exchange reserves held by the State Bank of Pakistan (SBP) have plummeted to $3.91 billion.

    The decline in reserves is primarily attributed to external debt payments, coinciding with the expiration of the country’s International Monetary Fund (IMF) program, which has been stalled for several months.

    The SBP announced on Thursday that the reserves decreased by $179 million during the week ending on June 2, leaving the country with barely enough coverage for controlled imports for just one month.

    Commercial banks, on the other hand, are holding net foreign reserves worth $5.42 billion, $1.51 billion more than the central bank. Consequently, Pakistan’s total foreign reserves stand at $9.3 billion as of June 2.

    This marks the sixth consecutive weekly drop in foreign exchange reserves for Pakistan, signaling a lack of progress in securing external financing. Political instability has played a significant role in the deteriorating economy, and the country has yet to secure much-needed funding to avert the risk of default.

    Pakistan’s $350 billion economy is currently in turmoil due to financial woes and the delay in reaching an agreement with the IMF. The pending agreement would release crucial funds that are essential for stabilizing the economy.

    The government has been engaged in discussions with the IMF since the end of January to resume a $1.1 billion loan tranche, which has been on hold since November 2022. This loan is part of a larger $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.

    Earlier today, Finance Minister Ishaq Dar revealed that the coalition government has shared its budget numbers with the IMF, aiming to unlock the ninth review.

    He expressed confidence that there are “no issues in the numbers.” Pakistan’s government faces significant pressure from the IMF to implement stringent fiscal measures and unlock the final tranche of a vital bailout package.

    To meet the IMF’s requirements, Pakistan must eliminate subsidies in sectors such as energy, allow the rupee to float against the US dollar, increase taxes and duties, and impose import restrictions. These measures are seen as crucial steps toward stabilising the economy and securing external funding.

    The future of Pakistan’s economy hinges on successful negotiations with the IMF and the implementation of effective economic reforms.

    The government must address political instability and work towards regaining the confidence of international lenders to alleviate the financial strains on the country.

  • 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.