Pakistan receives $991.4mln first IMF loan tranche

KARACHI: The first tranche worth $991.4 million of a $6 billion International Monetary Fund (IMF) loan facility was received by Pakistan on Wednesday with a note that continuation of this critical bailout programme depends on the aggressive fiscal measures and commitment to its conditions.

“The SBP has received the IMF first tranche of $991.4 million which is equivalent to SDR [Special Drawing Right] $716 million,” the central bank chief spokesman said on Wednesday.

The country’s finances got a boost after the Fund released disbursement, which will help shore up foreign exchange reserves, bolster currency and meet debt-servicing obligations.

The loan installment from the IMF has increased the foreign exchange reserves to $15.434 billion from $14.443 billion as of June 28, while the reserves held by the central bank reached $8.263 billion, compared to $7.272 billion.

The SBP’s gross reserves are still less than the equivalent of two month’s worth of imports despite the fresh IMF inflows. Pakistan received the first tranche of $500 million from Qatar as placement of funds and monthly $275 million supply of oil on deferred payment from Saudi Arabia.

Analysts said the IMF extended arrangement is expected to unlock further credits from other lenders.

The Fund’s support programme is likely to mobilise total financing of around $38.6 billion over the next three years from the country’s international partners.

Bilal Khan, a senior economist at Standard Chartered Bank, said the IMF disbursements should strengthen Pakistan’s prospects for additional external financing – from both the private markets as well as official lenders. “Beyond direct disbursements, the IMF support will serve as an important signalling mechanism to the markets on policy makers’ reform intentions and commitments,” Khan said.

Governor SBP Dr Reza Baqir, in his analyst briefing on Tuesday, said Pakistan’s credibility had improved due to entry into the IMF programme and the country can now access external financing from various bilateral, multilateral organisations and friendly countries.

”The IMF never lends to any country if they are not sure about the country’s ability to finance its external needs,” the governor said. Foreign debt repayments of the country will rise to an all-time high of $15 billion in the current fiscal year, Topline Securities said in a research note, citing the IMF staff report on Pakistan.

Non-Paris club bilateral makes up the larger portion of repayment ($7.4 billion), majorly emanating from China and Saudi Arabia amounting to $3.4 billion and $3 billion respectively, the report said.

The IMF’s annual average repayment of 2013 program during FY20-22 will clock around $1 billion per annum, which suggests net receipts of $1 billion a year during the program period. The government is planning to issue new bonds to the tune of $3 billion as yields on international bonds have come down to 2-year low since staff level agreement of Pakistan with the IMF.