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Saturday, May 18, 2024

SBP receives loan tranche of $1.16bn amid dwindling forex reserves

In its handout, the IMF stressed the importance of raising electricity charges and increasing taxes on petroleum products in accordance with the timeline agreed upon between Pakistan and the IMF.

State Bank of Pakistan (SBP) announced on Wednesday that it has received loan tranche of Extended Fund Facility (EFF) totaling to USD 1.16 billion (equivalent of SDR 894 million).

The Executive Board of the International Monetary Fund (IMF) completed the combined seventh and eighth reviews under the Extended Fund Facility (EFF) for Pakistan, allowing the authorities to draw the equivalent of SDR 894 million (about US$1.1 billion).

Read more: Amid govt-PTI blame game, IMF agreed to revive EFF programme

The central bank shared this development in a tweet saying, “The State Bank of Pakistan (SBP) has received proceeds of $1.16 billion (equivalent of SDR 894 million) after the IMF Executive Board completed the combined seventh and Eight review under the Extended Fund Facility for Pakistan.”

This will help improve SBP’s foreign exchange reserves and will also facilitate realization of other planned inflows from multilateral and bilateral sources, the bank added.

Revival of the IMF loan programme was much awaited in the country to upbring its dwindling foreign exchange reserves.

The SBP’s foreign currency reserves were $7,809.9 million on August 19, a $87 million decrease from $7,897.3 million on August 12.

However, the IMF expected that Pakistan’s economy would develop at a 3.5% annual rate, but average inflation would be 19.9%, based on forecasts made before the floods wrecked significant parts of the country.

In its handout, the IMF stressed the importance of raising electricity charges and increasing taxes on petroleum products in accordance with the timeline agreed upon between Pakistan and the IMF.

“Efforts to strengthen the viability of the energy sector and reduce unsustainable losses, including by adhering to the scheduled increases in fuel levies and energy tariffs, are also essential,” said IMF Deputy Managing Director Antoinette Sayeh.

She said that containing current spending and mobilizing tax revenues are critical to create space for much-needed social protection and strengthen public debt sustainability.

Although IMF loan was a need to take the economy out of the emergency ward, but it never comes with easy conditions. The IMF has provided loans to Pakistan on twenty-two occasions and every time the public has paid massive costs. As now, electricity and fuel prices have overburdened the public in last couple of months. However, the crushing is not over yet and more burden is expected from the government on the backs of citizens.