Pakistan receives first IMF tranche of $991.4 million

KARACHI: Pakistan has received the first tranche of $991.4 million from the International Monetary Fund (IMF) out of the $6 billion bailout program approved by the fund on July 3, 2019, the country’s central bank confirms. 
“SBP (State Bank of Pakistan) has received IMF’s first Tranche of $991.4 million which is equivalent to SDR (Special Drawing Rights) 716 million,” according to a statement issued by the central bank on Wednesday.
The IMF Executive Board had approved a 39-month extended arrangement under the Extended Fund Facility (EFF) for Pakistan for an amount of SDR 4,268 million (about $6 billion or 210 percent of quota) to support the Islamabad’s economic reform program.
Pakistan will receive the remaining amount in different tranches — each associated with a unique set of economic targets — over the program’s duration of 3 years subject to quarterly and four bi-annual reviews.
The latest inflow from the fund has strengthened the country’s depleting foreign exchange reserves, which by June 28, 2019, stood at $14.44 billion including $7.3 billion held by the central bank.
“During the week ending 28 June 2019, SBP received the inflow of $500 million from Qatar as placement of funds. After taking into account outflows relating to external debt and other official payments, SBP reserves decreased by $9 million during the week,” the SBP statement issued on Thursday said.
Though the currency market witnessed some pressure on Wednesday, analysts say the IMF tranche has boosted market confidence. 
“The sentiment is positive in the currency market following the inflows from IMF,” Malik Bostan, President of Forex Association of Pakistan, told Arab News on Wednesday.
The rupee weakened in inter-bank and open currency market from 157.70 to 158.20 and 157.70 to 158.50 respectively against the greenback due to “auto adjustment of the currency value,” dealers say. 
Pakistan has adopted Market Based Exchange Rate regime to fulfill the IMF’s condition to divorce the fixed exchange rate regime. The fund stresses that a flexible, market-determined exchange rate will help restore competitiveness, rebuild official reserves, and provide a buffer against external shocks.
Country’s stock market which remained in the grip of uncertainty about the IMF program also ended bearish against the expectation after the inflow from IMF. “The investors are worried about the 13 percent inflation data fearing further interest rate hike,” Samiullah Tariq, Director Research at Arif Habib Limited, a brokerage firm, told Arab News.
However, he said, “though the past trend shows that the market reacted positively after inflows it is expected that it will take time to synchronize as the further inflows and discharge of liabilities take place.” 
The IMF expects that the loan and the associated package of reforms will unlock another $38 billion in loans from other international partners provided Pakistani authorities to push forward with vital reform agenda.
“An ambitious agenda to strengthen institutions and remove impediments to growth will allow Pakistan to reach its full economic potential,” the IMF statement read.
The IMF projects Pakistan’s debt stock to go up from $104.165 billion by end of the fiscal year 2018-19 to $112.5 billion in the financial year 2019-20 and $133 billion by the end of the fiscal year 2023-24.