Pakistan receives nearly $500m IMF tranche; Sells 30-year Eurobond

Resumption of IMF programme paves the way for Islamabad to raise $2.5 billion from international markets through sell of 5 to 30-year Eurobond

LAHORE — Pakistan has received third tranche of nearly $500 million from the International Monetary Fund under its $6 billion loan programme, marking resumption of the fund’s assistance to the struggling economy of the South Asian nations.
State Bank of Pakistan, the central bank, on Tuesday confirmed that it received the IMF tranche almost a week after the fund’s executive board approved four pending reviews of the country’s economy. The programme was on hold since the Covid-19 outbreak in the country in February 2020.

“SBP has received IMF tranche of US$ 498.7 million (equivalent to SDR 350 million) under the Extended Fund Facility,” Pakistan‘s central bank said on its official Twitter handle.

Last week, the IMF said that the latest payment brought total disbursements under the Extended Fund Facility to $2 billion since the programme was first approved in July 2019.

“The Pakistani authorities have continued to make satisfactory progress under the Fund-supported program, which has been an important policy anchor during an unprecedented period,” IMF Deputy Managing Director Antoinette Sayeh said in a statement.

The disbursement was made after Pakistan cleared up an issue with data on government guarantees dating back to the 2016 fiscal year that had been reported inaccurately and put the government in non-compliance with the programme.

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The IMF said Pakistani authorities had taken strong corrective actions to address institutional shortcomings, including a lack of interagency coordination, to correct the issue.

“While the Covid-19 pandemic continues to pose challenges, the authorities’ policies have been critical in supporting the economy and saving lives and livelihoods,” Antoinette Sayeh said.

Official sources said the government is going to implement tough decisions to secure the IMF assistance to support its foreign exchange reserves,  which surged $275 million to  3-year high at $13.29 billion in the week ended on March 19.

They said the government will increase electricity tariff, withdrew income tax exemption worth Rs140 billion and introduced controversial amendments in the central bank’s laws to make it an independent institution.

“The tough decisions are estimated to keep inflation reading high at around 9% compared to the government target of 6.1% in the ongoing fiscal year 2021,” according to an official.

The revival of the IMF loan programme has revived global investors’ confidence on Pakistan. This paved the way for Pakistan to raise $2.5 billion from international markets through sell of 5 to 30-year Eurobond.

Besides, the programme also helped the country to get another $10-12 billion each from the World Bank and the Asian Development Bank (ADB) over the next five years.

Moreover, the country had taken measure to cut import bills and support exports to grow. Such measures helped turning the balance of current account in deficit at $19 billion in Fiscal year 2018 to a surplus at $881 million in the first 8-month (Jul-Feb) of current fiscal year 2021.

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