ISLAMABAD: The International Monetary Fund (IMF) and the State Bank of Pakistan (SBP) on Friday discussed the possibility of tightening monetary policy and increasing foreign exchange reserves by the end of June 2023. Did a period of
Pakistan’s foreign exchange reserves, held by the State Bank, stood at $3.1 billion as of February 10, 2023 after an increase of $276 million.
This was primarily due to improved liquidity in the market after allowing for adjustments in exchange rates to narrow the gap between the interbank and open market.
Keeping in view the IMF’s prescription to take foreign exchange reserves to $12 billion by the end of June 2023, Pakistan would have to receive at least $17-18 billion in four and a half months. This includes a requirement of $5 billion for external debt repayment by June 30, 2023, $3-4 billion in current account deficit (CAD) financing and $8-9 billion to boost foreign exchange reserves.
If Pakistan’s wish list is accepted by the IMF, it would have to extend foreign debt, CAD financing and foreign exchange reserves to $6-$7 billion by the end of June 2023. An inflow of $11-12 billion is required.
The IMF has asked the State Bank to increase the policy rate by 300 to 400 basis points to move the interest rate from negative to positive.
But SBP officials clarified that the Independent Monetary Policy Committee (MPC) was set up under the SBP Amendment Act, and the forum was empowered to take decisions keeping in mind macroeconomic fundamentals.
A senior Finance Ministry official told JEE News on Friday that the Pakistani side has withdrawn from the IMF’s review mission to attack the Staff Level Agreement (SLA) ahead of the IMF Executive Board meeting next week. Saying, that is expected in four to six weeks.
Pakistani officials are still hoping to reach a staff-level deal next week, but there is still a gap on estimates on the external financing front.
A senior official admitted that Pakistan has taken tough and bold decisions by increasing electricity and gas rates and imposing Rs 170 billion in taxes through the mini-budget. The exchange rate was brought to market base and the prices of POL [petrol, oil, lubricants] increased.
All these steps were in the hands of the Pakistani authorities, but now the most important steps remain unresolved as they seek confirmation from all multilateral and bilateral lenders to meet external financing requirements during the program period. The EFF’s IMF program will expire on June 30, 2023 and there is no possibility of further extension.
“The IMF is pushing hard for a target of $11-12 billion in gross foreign exchange reserves by the end of June 2023. However, the Pakistani side has pegged the gross foreign exchange reserves in the range of $6-8 billion. asking to settle below double digits. Considering the possibility of a reduction in confirmation by the bilateral partners,” said official sources, who im to move towards the signing of a staff-level agreement. F is aware of the progress of the ongoing virtual dialogue with the mission.
Both sides have agreed that there was no possibility of the gross foreign exchange reserve position touching $16.2 billion by the end of June 2023, as per the finalization of the 7th and 8th reviews under the 6.5 billion EFF arrangements. was summoned on the occasion of
Now the Pakistani side wants a 50 percent reduction in the target set at the end of the program period, but the IMF is insisting on getting confirmation through all possible channels.
Finance Minister Ishaq Dar, who is currently visiting Dubai, is trying to get approval from multilateral, bilateral lenders and commercial banks in a phase-by-phase manner to get the dollars needed for the IMF’s recovery. The arrival of support can be obtained. Stalled program.
