IMF SBA: Pakistan to repay 2nd instalment later this month

Thursday, 03 May 2012 09:03

Posted by Imaduddin

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RIZWAN BHATTI

KARACHI: Pakistan will pay the second installment of around $400 million of the Stand-By Arrangement (SBA) to International Monetary Fund (IMF) in the last week of May 2012.

Sources in Ministry of Finance told Business Recorder on Wednesday that arrangement were being made to pay the installment despite several economic challenges and the payment will be made as per schedule already decided between Pakistan and IMF.

According to SBA agreement with the Fund, Pakistan has to pay a total of three installments worth $908.4 million (587.9 SDR) to IMF on account of SBA during fiscal year 2011-2012. One installment has already been paid in the third quarter of FY12 and remaining two instalments will be paid in the fourth quarter of current fiscal year.

During the current fiscal year the country has to pay a cumulative amount of $1.525 billion including $182.2 million interest to IMF on account of different programmes. This amount in term of Special Drawing Rights (SDR) is calculated at 987.3 million along with 117.9 million of interest payment, they informed.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. Currently, a US dollar is equivalent to about 1.6 SDR, however its changes continuously.

Some three years back, depleting foreign reserves followed by high current account deficit compelled Pakistan to avail SBA programme from IMF to avoid any default. According to that agreement SBA’s first installment was due in February 2012, while second is due in May this year. Pakistan has already paid first installment of 258.4 million SDRs ($399 million) to IMF on February 24, 2012.

The payment of second installment of SBA programme worth 258.4 million SDR (some $400 million) to IMF is due on May 25, 2012 and third installment of approximately 71 million SDR ($110 million) on June 29, 2012.

Sources said that Pakistan was making arrangements for timely payment of the second tranche to IMF and there will be no delay in the payment. “Like first installment, Pakistan will successfully pay the second SBA installment of $400 million on 25th of this month,” they added.

This amount will be paid from the foreign currency reserves held by State Bank of Pakistan and the payment will be the second installment of the principle amount, while interest on the SBA is already being paid by the central bank on quarterly basis.

Presently, the country’s foreign exchange reserves stood at $16.42 billion including $11.916 billion held by SBP and $4.5 billion by banks. However, the reserves are expected to fall because of IMF payment, sources said.

Pakistan re-joined IMF programme in November 2008 to avoid default as the country’s reserves dipped to less than $6 billion level in October 2008 followed by higher current account deficit.  Out of the total $11.3 billion programme, the country received about $7.6 billion and failed to get the remaining $3.7 billion due to suspension of IMF SBA owing to delay in implementation of fiscal reforms by the government. As per the agreement and repayment schedule agreed between Pakistan and IMF, the country will repay a total $7.6 billion to the IMF till the end of fiscal year 2014-15.

According to SBP’s statistics, with an increase of $0.8 billion the outstanding stocks of IMF loans have reached $8.9 billion in fiscal year 2010-2011. However, the increase in IMF loans during last fiscal year was substantially low than a raise of $2.9 billion in the previous year (FY2010). The decline in FY11 was due to suspension of the IMF programme.