ISLAMABAD - Pakistan has received $1.026 billion from the International Monetary Fund (IMF) which would enhance the country’s foreign exchange reserves.
“Following the approval of the IMF Executive Board of 37-month Extended Fund Facility amounting to $7 billion, SBP has received the first tranche of SDR 760 million (equivalent to USD 1026.9 million) from the IMF today (Friday),” said State Bank of Pakistan. The IMF Executive Board on Wednesday approved Pakistan’s 37-month Extended Fund Facility (EFF) arrangement of about $7 billion. It had also authorized to immediately release the first loan tranche of nearly $1.1 billion, which Pakistan received on Friday.
The inflow would enhance the country’s foreign exchange reserves. The total liquid foreign reserves held by the country stood at $14,873.1 million as of 20-Sep-2024. The break-up of the foreign reserves position showed that foreign reserves held by the State Bank of Pakistan are $9,533.6 million and net foreign reserves held by commercial banks are $5,339.5 million. According to the IMF, Pakistan has taken key steps to restoring economic stability with consistent policy implementation under the 2023-24 Stand-by Arrangement (SBA). Growth has rebounded (2.4 percent in FY24), supported by activity in agriculture, while inflation has receded significantly, falling to single digits, amid appropriately tight fiscal and monetary policies. A contained current account and calm foreign exchange market conditions have allowed the rebuilding of reserve buffers. Reflecting disinflation and steadier domestic and external conditions, the State Bank of Pakistan has been able to cut the policy rate by a total of 450 bps since June also supported by an appropriately tight FY25 budget.
Despite this progress, Pakistan’s vulnerabilities and structural challenges remain formidable. A difficult business environment, weak governance, and an outsized role of the state hinder investment, which remains very low compared to peers, while the tax base remains too narrow to ensure tax fairness, fiscal sustainability and meet Pakistan’s large social and development spending needs. In particular, spending on health and education has been insufficient to tackle persistent poverty, and inadequate infrastructure investment has limited economic potential and left Pakistan vulnerable to the impact of climate change. Without a concerted adjustment and reform effort, Pakistan risks falling further behind its peers. Because of the progress and stability achieved under the 9-month 2023 SBA, the authorities are embarking on renewed efforts to address these challenges, build resilience and enable sustainable growth.