Tag: Stand-By Arrangement

  • SBP reports second consecutive weekly decline in forex reserves

    SBP reports second consecutive weekly decline in forex reserves

    During the week ending on November 17, 2023, the State Bank of Pakistan (SBP) experienced a decline of $217 million in its foreign exchange reserves, settling at $7,180.0 million, as revealed by data released on Thursday.

    The total liquid foreign reserves for the country amounted to $12.3 billion, with commercial banks holding net foreign reserves of $5.1 billion.

    The central bank attributed this reduction in reserves to debt repayments. In a statement, the SBP explained, “During the week ended on November 17, 2023, the SBP’s reserves decreased by US$ 217 million to US$ 7,180.0 million due to debt repayments.”

    This marks the second consecutive week of a decline in the dollar stockpile, following a $115 million decrease in the previous week.

    It’s noteworthy that in July of this year, the central bank’s reserves received a significant boost as Pakistan received the initial tranche of approximately $1.2 billion from the International Monetary Fund (IMF).

    This followed the approval of a new $3 billion stand-by arrangement (SBA). Additional inflows were received from Saudi Arabia and the UAE.

    However, the SBP’s reserves have been facing pressures due to ongoing debt repayments, increased import payments following the relaxation of restrictions, and a lack of fresh inflows.

    In a positive development, the IMF announced last week that its staff and Pakistani authorities had reached an agreement on the first review of the SBA.
    The staff-level agreement is pending approval by the IMF Executive Board.

    The IMF stated, “The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation programme supported by the IMF’s US$3 billion (SDR2,250 million) SBA.”

    Upon approval, approximately US$700 million (SDR 528 million) will become available, bringing the total disbursements under the programme to nearly US$1.9 billion.

    Caretaker Finance Minister Dr Shamshad Akhtar, speaking to the media after the SLA with the IMF, expressed confidence that external financing would not be an issue, anticipating increased inflows in December 2023, which would contribute to boosting the foreign exchange reserves.

  • 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 and Pakistan seal agreement on $3 billion SBA, await board approval

    IMF and Pakistan seal agreement on $3 billion SBA, await board approval

    In a significant development, the International Monetary Fund (IMF) declared on Wednesday that its team and Pakistani authorities have successfully concluded the initial review of the $3 billion, nine-month Stand-By Arrangement (SBA).

    This staff-level agreement awaits the approval of the IMF Executive Board.

    Upon endorsement, approximately US$700 million (SDR 528 million) will be accessible, contributing to a cumulative disbursement of nearly US$1.9 billion under the programme.

    A delegation from the IMF, led by Nathan Porter, conducted discussions in Islamabad from November 2–15, 2023, focusing on the inaugural review of Pakistan’s economic programme supported by the IMF SBA.

    The nascent recovery, supported by international partners and enhanced confidence indicators, is attributed to the stabilizing policies outlined in the SBA.

    The disciplined implementation of the FY24 budget, ongoing adjustments in energy prices, and increased inflows into the foreign exchange (FX) market have alleviated fiscal and external pressures.

    The IMF anticipates a decline in inflation in the upcoming months, driven by diminishing supply constraints and modest demand.

    Nevertheless, Pakistan remains exposed to significant external risks, including heightened geopolitical tensions, escalating commodity prices, and potential tightening in global financial conditions.

    It is imperative to persist in efforts to enhance resilience in the face of these challenges, according to the international lender

  • Pakistan’s forex reserves surge by $67 million to reach $7.7 billion

    Pakistan’s forex reserves surge by $67 million to reach $7.7 billion

    The State Bank of Pakistan (SBP) reported a notable weekly surge in foreign exchange reserves, with an increase of $67 million, reaching $7.7 billion as of October 13, as per the latest data release on Thursday.

    In total, the nation’s readily available foreign reserves amounted to $12.9 billion, with commercial banks holding $5.2 billion in net foreign reserves. The central bank did not provide a specific explanation for this increase.

    During the week concluding on October 13, 2023, the SBP’s reserves climbed by $67 million, reaching a total of $7,714.0 million, according to the SBP’s statement. This follows a previous week’s increase of $31 million.

    Notably, in July of this year, the central bank’s reserves received a significant boost when Pakistan received an initial disbursement of approximately $1.2 billion from the International Monetary Fund (IMF), following the approval of a new $3-billion stand-by arrangement. Additionally, inflows from Saudi Arabia and the UAE contributed to this increase.

    Nevertheless, the central bank’s reserves have faced pressure due to ongoing debt repayments, increased import expenditures following the easing of restrictions, and a lack of fresh inflows.

  • Pakistan successfully secures final IMF approval for $3 billion bailout

    Pakistan successfully secures final IMF approval for $3 billion bailout

    The International Monetary Fund (IMF) has officially granted approval to Pakistan for a 9-month Stand-By Arrangement (SBA) amounting to approximately $3 billion. This decision comes shortly after reaching a staff-level agreement with the country.

    In a statement, the IMF announced, “Today, the Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR2,250 million (about $3 billion, or 111 percent of quota) to support the authorities’ economic stabilization program.”

    Earlier on the same day, Finance Minister Ishaq Dar confirmed that Pakistan had received $1 billion from the United Arab Emirates (UAE) as part of their financial commitment to assist Pakistan in securing the IMF bailout package. During a televised media address, the finance minister stated, “The UAE has deposited the amount into the State Bank account.”

    Additionally, Saudi Arabia had previously deposited $2 billion in the State Bank of Pakistan (SBP) account, fulfilling the IMF’s condition to bridge the external financing gap and bolster the country’s foreign reserves. This contribution aims to support the economic stability of Pakistan.

    Pakistan had signed a short-term IMF deal on June 30, under which the country was set to receive $3 billion over nine months, pending approval from the IMF’s board. With the Executive Board’s approval, an immediate disbursement of SDR894 million (approximately $1.2 billion) is authorised, as stated by the IMF.

    The remaining funds will be disbursed in phases throughout the duration of the programme, subject to two quarterly reviews, according to the IMF’s statement. The IMF acknowledges that Pakistan is currently facing a challenging economic situation due to external difficulties, devastating floods, and policy missteps, resulting in significant fiscal and external deficits, rising inflation, and depleted reserve buffers in the fiscal year 2023.

    The IMF sees the new SBA-supported programme as a means to address both domestic and external imbalances and provide a framework for financial support from multilateral and bilateral partners. Pakistan’s successful acquisition of the IMF bailout package was contingent upon implementing difficult economic measures, such as interest rate hikes and tax increases, to fulfill the IMF’s conditions.

  • Pakistan’s foreign exchange reserves boosted by $2 billion deposit from Saudi Arabia

    Pakistan’s foreign exchange reserves boosted by $2 billion deposit from Saudi Arabia

    Pakistan’s central bank has received a significant financial boost of $2 billion from Saudi Arabia, as announced by Federal Minister Ishaq Dar. This infusion of funds will greatly bolster the country’s low foreign exchange reserves.

    During a media briefing on Tuesday, Dar expressed gratitude, stating, “Our brother nation, Saudi Arabia, has deposited $2 billion into the account of the State Bank of Pakistan (SBP).” He further emphasised that this contribution will directly enhance Pakistan’s foreign exchange reserves.

    At the close of last week, the SBP’s forex reserves grew by $393 million to reach $4.463 billion, primarily due to official government inflows. Over the past two weeks, the SBP’s reserves have surged by $937 million. However, it is important to note that these reserves still only cover approximately a month’s worth of imports.

    Dar stated, “These $2 billion will be reflected in the SBP’s reserves by the week ending 14th July.” The finance minister also commended the Saudi government, specifically King Salman and Crown Prince Mohammad bin Salman, for their instrumental role in this gesture of support. Dar extended heartfelt appreciation to the leadership of the Kingdom of Saudi Arabia for depositing $2 billion with the SBP and expressed optimism about future positive economic developments. He declared that Pakistan’s economic situation has nearly stabilised and is poised for growth.

    This development follows the recent announcement by the International Monetary Fund (IMF) that its staff and Pakistani authorities have reached an agreement on policies backed by a $3 billion, nine-month Stand-By Arrangement (SBA). The staff-level agreement is pending approval by the IMF Executive Board, with a decision expected on 12th July.

    Read more: Pakistan commits to 4% annual profit on $2 billion deposit from Saudi Arabia

    Nathan Porter, IMF Mission Chief to Pakistan, stated, “The new SBA builds upon the authorities’ efforts under Pakistan’s 2019 EFF-supported program, which expires at the end of June.” The new IMF arrangement, viewed as highly favorable for the government and economy amidst the ongoing crisis, extends Pakistan’s commitment to the lender well into the second half of fiscal year 2023-24. Moreover, it represents an upgrade from earlier expectations of receiving $1.1 billion following the ninth review.

    Experts have consistently emphasised the critical nature of resuming the IMF bailout package for Pakistan, a cash-strapped South Asian economy grappling with a balance of payments crisis. In addition to mitigating risks of potential default, the funding from the international lender is expected to pave the way for additional inflows from Pakistan’s multilateral and bilateral partners.

  • Pakistan commits to boost foreign exchange reserves to $11.7 billion by 2024

    Pakistan commits to boost foreign exchange reserves to $11.7 billion by 2024

    Pakistan has made a commitment to the International Monetary Fund (IMF) to significantly increase its gross foreign exchange reserves by $7.65 billion. The goal is to raise the reserves to $11.7 billion by the end of the financial year 2024, up from the current level of $4.056 billion in the financial year 2023. This move is aimed at building a buffer of foreign exchange reserves to protect the national economy from external shocks.

    The assurance was given through a Letter of Intent (LoI) signed by Finance Minister Ishaq Dar and State Bank of Pakistan (SBP) Governor Jameel Ahmed. Under a $3 billion stand-by arrangement (SBA) for nine months, Pakistan assured the IMF and its executive board of its commitment to bolster its foreign exchange reserves.

    If the gross foreign exchange reserves reach $11.7 billion by the end of June 2024, they will be sufficient to meet the country’s import requirements for goods and services for approximately 1.8 months.

    The balance of payment (BoP) chart, agreed upon by the IMF and Pakistan, indicates that projected disbursements of foreign loans during the current financial year 2023-24 are expected to amount to $15.01 billion from multilateral and bilateral creditors. This financial year started on July 1, 2023, and will end on June 30, 2024.

    The analysis of the BoP data suggests that Pakistan needs to secure external financing from multilateral and bilateral creditors during the current fiscal year. Additionally, Pakistan is seeking an additional deposit of $2 billion from the Kingdom of Saudi Arabia and $1 billion from the United Arab Emirates (UAE). The Islamic Development Bank (IsDB) has agreed to provide a $1 billion loan program.

    Furthermore, Pakistan is actively working on program loans and project financing from the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank (AIIB) to secure a total disbursement of $15 billion from all multilateral and bilateral sources.

    To further strengthen its reserves, Pakistan intends to engage with bilateral partners, especially China, Saudi Arabia, and the UAE, to extend the maturity of their existing deposits, which amount to $2 billion, $3 billion, and approximately $2 billion, respectively, in the current financial year.

    The IMF executive board is scheduled to convene on July 12, 2023, in Washington DC, to review and consider Pakistan’s request for approval of a $3 billion short-term bailout package, including a $1 billion tranche release. Upon approval by the executive board, the $1 billion tranche will be disbursed within a few days.

    The IMF staff has already circulated copies of the Letter of Intent among the executive board members. In this document, Finance Minister Ishaq Dar and the SBP governor have provided assurances regarding the implementation of crucial fiscal and energy reforms to address fiscal challenges. Islamabad has also committed to tackling issues in the energy sector, including measures to control the circular debt problem.

    To address energy sector concerns, the government plans to raise power and gas tariffs in line with the determinations made by the regulators. The National Electric Power Regulatory Authority (NEPRA) will finalise the power tariff, while the facts regarding gas tariffs are being ascertained by relevant officials.

    The Oil and Gas Regulatory Authority (OGRA) has already recommended increasing gas tariffs by 45 per cent and 50 per cent for two major gas utilities. The government has a 40-day timeframe to make a decision on this matter, after which the recommendations will be notified in the second week of July 2023.

    Under the nine-month SBA program, it is anticipated that there will be two reviews conducted by the IMF mission in September and December 2023. Each review is expected to lead to the disbursement of a $1 billion installment.

    Overall, Pakistan is taking significant measures to strengthen its foreign exchange reserves, seek external financing, and implement necessary reforms in order to address its economic challenges and ensure stability.

  • Govt expected to hike gas prices by 50%, electricity by Rs4 per unit for IMF deal

    Govt expected to hike gas prices by 50%, electricity by Rs4 per unit for IMF deal

    Pakistan is expected to increase gas sale prices by 45-50 per cent and electricity base tariffs by Rs3.50 to over Rs4 per unit for the fiscal year 2023-24.

    These adjustments must be notified before the upcoming meeting of the International Monetary Fund’s (IMF) Executive Board on July 12.

    According to reports, this increase in energy prices is necessary to pave the way for the $3 billion programme agreed upon under the Stand-By Arrangement (SBA) with the IMF at the staff level.

    Earlier, the Oil and Gas Regulatory Authority (Ogra) announced an increase of 50 per cent (Rs415.11 per MMBTU) for consumers of the Sui Northern Gas Pipeline Limited (SNGPL), bringing the subscribed gas price to Rs1,238.68 per MMBTU.

    Additionally, the regulator raised the gas price by 45 per cent (Rs417.23 per MMBTU) for consumers of the Sui Southern Gas Company Limited (SSGCL) for the fiscal year 2023-24. However, the government has yet to officially notify the increase in gas prices for the upcoming financial year.

    The SNGPL has an accumulated shortfall of Rs560.378 billion up to FY23, while Sui Southern has a shortfall of Rs97.388 billion. The federal government had previously notified the increase in gas sale prices based on different categories from January 1, 2023.

    As per the existing policy, high-end consumers subsidise the gas prices for low-end consumers. It is likely that the government will continue this policy, with high-end consumers paying the gas price for low-end consumers starting from July 1, 2023.

    According to The News, the entire energy sector is currently burdened by circular debt, which amounts to over Rs4,300 billion. This debt is divided between the oil and gas sector, with Rs1,700 billion, and the power sector, with Rs2,600 billion.

    The IMF emphasises the need for Pakistan to make the energy sector viable and sustainable, which requires increasing the base tariff for the fiscal year 2023-24.

  • IMF’s $3 billion stand-by arrangement expected to bolster Pakistan’s economy and restore investor confidence

    IMF’s $3 billion stand-by arrangement expected to bolster Pakistan’s economy and restore investor confidence

    Pakistan and the International Monetary Fund (IMF) have achieved a significant milestone with the announcement of a staff-level agreement (SLA) on a $3 billion stand-by arrangement (SBA).

    Nathan Porter, the IMF’s Mission Chief to Pakistan, expressed his satisfaction, stating that the IMF team has reached a staff-level agreement with the Pakistani authorities on a nine-month Stand-by Arrangement (SBA) in the amount of SDR2,250 million (about $3 billion or 111 per cent of Pakistan’s IMF quota).

    The Pakistani economy has been facing multiple challenges since the completion of the seventh and eighth reviews under the 2019 Extended Fund Facility (EFF) in August 2022. The country has experienced external shocks, including devastating floods in 2022 that affected millions of Pakistanis, as well as a surge in international commodity prices due to the conflict in Ukraine involving Russia.

    These shocks, combined with certain policy missteps such as constraints on the foreign exchange market, have resulted in a stagnant economic growth rate. Furthermore, inflation, particularly for essential items, has risen significantly.

    Despite the authorities’ efforts to reduce imports and the trade deficit, foreign reserves have declined to alarmingly low levels. The power sector is also facing liquidity issues, with mounting arrears (circular debt) and frequent load shedding.

    The newly established stand-by arrangement (SBA) will serve as a critical support mechanism for the Pakistani government in stabilising the economy and mitigating the impact of recent external shocks. It aims to maintain macroeconomic stability while providing a framework for financial assistance from both multilateral and bilateral partners.

    The $3 billion funding for a duration of nine months has exceeded expectations and will contribute to restoring investor confidence. The uncertainty surrounding the upcoming change in government after June 2023 has been alleviated to a considerable extent. The agreement also opens avenues for social and development spending by improving domestic revenue generation and ensuring careful execution of expenditures to address the needs of the Pakistani people.

    The successful implementation of steadfast policies is paramount for Pakistan to overcome its current challenges. This includes demonstrating greater fiscal discipline, adopting a market-determined exchange rate to absorb external pressures, and making further progress on reforms, particularly in the energy sector, to enhance climate resilience and improve the business climate.

    Given the formidable obstacles faced by Pakistan, the newly established stand-by arrangement (SBA) serves as both a policy anchor and a platform for financial support from multilateral and bilateral partners in the foreseeable future.

  • IMF reaches $3 billion stand-by arrangement with Pakistan, averting impending default

    IMF reaches $3 billion stand-by arrangement with Pakistan, averting impending default

    The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on a stand-by arrangement worth $3 billion, announced the lender. This decision has been eagerly anticipated by Pakistan, a South Asian nation that is on the verge of default.

    The approval of the IMF board, expected in July, is required to finalise the deal. After an eight-month delay, this agreement brings some relief to Pakistan, which is currently grappling with a severe balance of payments crisis and dwindling foreign exchange reserves.

    The funding of $3 billion, which will be disbursed over a period of nine months, surpasses initial expectations. Pakistan had been awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package that was initially agreed upon in 2019, and which expired on Friday. As a result, the country’s stock and currency markets remained closed on that day.

    According to IMF official Nathan Porter, the new stand-by arrangement builds upon the 2019 programme. Porter acknowledged the significant challenges faced by Pakistan’s economy in recent times, including devastating floods last year and rising commodity prices following the war in Ukraine.

    He stated, “Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute.” Porter further emphasised that the new arrangement would serve as a policy anchor and a framework for financial assistance from both multilateral and bilateral partners in the foreseeable future.

    Porter also highlighted the acute liquidity conditions in the power sector, characterised by mounting arrears and frequent power outages. Reforming the energy sector, which has accumulated a debt of nearly 3.6 trillion Pakistani rupees ($12.58 billion), has been a pivotal aspect of the discussions between Pakistan and the IMF.