Global liquidity booster: Pakistan to get 'unconditional' $2.77bn

ISLAMABAD: Pakistan will get an additional US$2.77 billion from the International Monetary Fund (IMF) on August 23 in the State Bank of Pakistan (SBP) account to boost liquidity for minimising the economic impact of the coronavirus.

Finance Minister Shaukat Tarin during a press conference, on Thursday stated that the IMF has approved the SDRs for member countries to boost liquidity for member countries and Pakistan also got its share of the SDRs, 0.43 percent of the total US$ 650 SDR allocation for member countries, which is exactly $2.77 billion.

This amount would be transferred in the SBP account on 23rd August and good thing is that this support is unconditional and there is no cost involved.

The Fund’s inflows in the SBP would increase foreign exchange reserves straightaway and consequently would have a salutary effect on the rupee.

The minister said that “we are thankful to the IMF board that they have thought about all the countries and especially for those countries facing challenges due to coronavirus”.

Pakistan set to receive $2.77 billion from IMF on Aug 23, says Tarin

“Now we will have to think how to use this money for productive purposes,” he added.

He said the money being provided by the IMF would be used in consultation in a way that no distortion is created in the economy.

As the measures taken in the budget is expected to increase growth and economic activity was evident from the increase in revenue collection in July 2021, he said.

About a question regarding the Auditor General of Pakistan (AGP) about the utilisation of $1.2 billion provided by the IMF to mitigate the economic impact of coronavirus, the minister said that he would not say anything about $1.22 billion but stated that the AGP has usually been writing big paras and currently there are 34,000 paras whose replies people have to give.

About the IMF programme, he said that there is no thinking in the government to request the IMF to club the 6th and the 7th review, because his approach is to conclude the review in the next month.

The minister acknowledged that the IMF is not as friendly as it was in 2008 owing to the geopolitical situation in the region.

Pakistan's forex reserves set for boost as IMF officially approves increased lending capacity

He said that Pakistan wanted to remain in the IMF programme to increase revenue collection and to bring about reforms in the power sector and not for taking loan.

He said circular debt has become unsustainable and no one would be ready to invest in the sector, if the circular debt is not brought down to a sustainable level, and that is the reason why Pakistan wants to remain in the IMF programme.

We are in talks with the IMF and they have asked some questions about the “Kamyab Pakistan Programme” regarding partners, and quantum of government guarantees as well as about the banks’ capacity to provide loans.

The minister stated the government would satisfy the IMF and the programme would be launched because it is for the vulnerable and the poor.

Replying to questions, the minister said that the IMF was being asked that increase in electricity tariff was not the solution to the problem, rather it would make the industry uncompetitive, “so let us do things our way to deal with the challenge of the power sector”.

About the current account deficit, he said that when the economy grows, the current account deficit also widens but it has to be managed. The minister said that the current account deficit by itself is not a bad thing but depends how it is managed.

The minister also cited examples how some countries, including Pakistan faced serious problem of current account deficit by maintaining their exchange rate at an artificial level, adding that Pakistan’s exchange rate is not fix and is market based.

IMF's new SDR allocation could bolster Pakistan's forex reserves by $2.8 billion: Fitch

The minister said that the government is trying to bring down the inflation and increase in food prices because of food items’ imports and now the government has decided to come down hard on cartelisation.

He said that as the international prices have started declining the food inflation in Pakistan would also come down.

The minister said that Rs610 billion budgeted petroleum levy collection seems unlikely but the government has some revenues that were not disclosed, which would help the government offset the impact of shortfall.

The minister said that some work has been in progress in the power sector and hopefully there would be a good news in a month or two about the IPPs as well as about improvement in the power sector.

About revival of Saudi oil facility on deferred payment, he said he would soon share good news in this regard in a few days.

Copyright Business Recorder, 2021