Pakistan sets to repay $125.98m to IMF on September 29

September 28, 2023 (MLN): Pakistan is scheduled to fulfil its financial commitment to the International Monetary Fund (IMF) by making a repayment of $125.98 million in terms of the General Resources Account (GRA) Repurchase (EFF) on September 29, 2023, representing a pivotal aspect of the ongoing economic collaboration with the IMF.

This repayment is associated with a landmark development on June 30, 2023, when Pakistan reached a Staff-Level Agreement with the IMF. The agreement was positioned on a nine-month Stand-by Arrangement (SBA) with the amount of SDR2,250m, which translated to approximately $3 billion or 111% of Pakistan's IMF quota.

This arrangement proved to be instrumental at the time when the cash-strapped Pakistan was on the brink of default.

For the unversed, the GRA is designed to address the varying balance of payment needs of member countries and encompass a range of lending programs with different disbursement schedules and maturities. In the case of Pakistan, this repayment represents a principal repayment (repurchase) requirement that stems from its outstanding GRA credit.

The GRA charges, accruing daily on the outstanding balance, are payable on a quarterly basis. The scheduled repayment will underline Pakistan's commitment to meeting its international financial obligations in a timely manner.

What is Special Drawing Rights (SDR)?

The SDR is an international reserve asset. The SDR is not a currency, but its value is based on a basket of five currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

As of September 27, 2023, SDR1 = $1.311240.

Under current IMF procedures, each U.S. dollar equivalent is calculated on the basis of the mid-market rates, as provided to the IMF by the Bank of England, based on spot exchange rates observed at around noon London time; the value of the U.S. dollar in terms of the SDR is rounded to six significant digits.

The Federal Reserve Bank of New York and the European Central Bank serve as backup providers for these exchange rates.

After the payment of 96,083,333 * $1.311240= 125.988m, the State Bank of Pakistan (SBP) reserves will likely drop to $7.57bn.

The foreign exchange reserves held by the SBP stood at $7.7bn during the week ended on September 15, 2023, according to the data released by the central bank on Thursday.

It is important to note that the forthcoming IMF review is scheduled for November, which will serve as a crucial milestone in Pakistan's journey towards economic recovery.

To ensure a positive outlook for the upcoming IMF review, the caretaker government, led by Prime Minister Anwaar-ul-Haq Kakar is making noteworthy strides to meet the fiscal and foreign exchange reserves targets set under the $3bn bailout agreement.

The latest statement issued by the Finance Ministry highlighted the government's commitment to maintaining fiscal discipline and achieving primary balance targets. In other words, it seems that Pakistan is on track to meet its obligations under the bailout agreement.

Copyright Mettis Link News