(CTN NEWS) – Finance Minister Ishaq Dar announced on Tuesday that the Kingdom of Saudi Arabia has deposited $2 billion in the State Bank of Pakistan (SBP).
This deposit comes shortly after Islamabad reached a staff-level agreement with the International Monetary Fund (IMF) on a $3 billion Stand-By Arrangement.
During a press conference, Minister Dar stated that the SBP has received the $2 billion deposit from Saudi Arabia. He further mentioned that this inflow has bolstered the central bank’s foreign exchange reserves, which will be reflected in the reserves for the week ending on July 14.
IMF Board Approval Pending for $3 Billion Stand-By Arrangement as Funds Arrive after Agreement Signing
The funds arrived following the signing of a short-term IMF deal on June 30, which falls under a standby arrangement disbursing $3 billion over nine months. The IMF’s board, convening on July 12, will need to approve the arrangement.
Multilateral and bilateral funds posed significant hurdles in Pakistan’s negotiations with the IMF, leading to a prolonged stalemate that ultimately expired.
However, the Stand-By Arrangement has provided the country with breathing space, averting a sovereign default and assisting the government in streamlining fiscal policies.
Analysts have warned that without the IMF bailout, Pakistan’s economic crisis, characterized by high inflation and insufficient foreign exchange reserves to support controlled imports for even a month, could have escalated into a debt default.
Minister Dar expressed gratitude to Chief of Army Staff General Asim Munir for his role in assisting the government, on behalf of Prime Minister Shehbaz Sharif. He also commended the Saudi rulers as “true brothers.”
Dar conveyed his optimism for more positive developments on the economic front in the coming days, asserting that stability has been achieved.
Fitch Upgrades Pakistan’s Credit Rating Following IMF Deal, Unlocking External Financing Sources
Following the IMF deal, credit rating agency Fitch upgraded Pakistan’s long-term foreign currency issuer default rating from CCC- to CCC in a statement issued on Monday, marking almost a year since the last upgrade.
Fitch cited improved external liquidity and funding conditions resulting from the Stand-By Arrangement, while cautioning that the fiscal deficit remains substantial.
With the IMF deal now in effect, Pakistan can unlock other external financing sources.
According to sources in the Finance Division, Pakistan has arranged $3.5 billion in bilateral funds from China, $2 billion from Saudi Arabia, and $1 billion from the United Arab Emirates.
On the multilateral side, Pakistan aims to secure $500 million from the Asian Development Bank, $500 million from the World Bank, and $3 billion from the IMF.
Fitch stated that local authorities anticipate $25 billion in gross new external financing in FY24, which includes $15 billion in public debt maturities, encompassing $1 billion in bonds and $3.6 billion owed to multilateral creditors.
Pakistan has also experienced significant political uncertainty since former Prime Minister Imran Khan was ousted through a no-confidence motion in April of last year.
To ensure the implementation of the program’s measures leading up to the elections scheduled for October, the IMF’s team met with all major political parties to seek support and consensus for the Stand-By Arrangement.
Imran Khan’s Pakistan Tehreek-e-Insaf party expressed support for the deal.
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