- Amount part of new SDR allocation
The State Bank of Pakistan (SBP) has received $2.75 billion from the International Monetary Fund (IMF) as part of the newly-allocated Special Drawing Rights (SDR), the central bank announced on Tuesday.
“SBP has received $2.75 billion from the IMF,” said SBP in a tweet post.
The latest funds would be vital for Pakistan to boost its foreign exchange position that has been a major concern for policymakers that are fighting to find the balance between economic growth and the country's current account position.
Pakistan's current account posted a $773-million deficit during the first month of the current fiscal year (FY22) due to a higher import bill.
Before taking into account the SDR allocation, the country's current stock of foreign currency reserves stood at $24.67 billion as on August 13, the latest data available. Of this amount, $17.63 billion are with the SBP, while $7.04 billion are with commercial banks.
SBP Governor Dr Reza Baqir had announced earlier that the IMF's SDR allocation would help take reserves to a historic high, adding that this time Pakistan's net international reserves position would improve as well.
The inflows come after the IMF board of governors in early August approved increasing the institution's lending capacity by $650 billion, the last step in approving an initiative to boost aid to the most vulnerable countries.
The program had already been approved by the IMF's executive board in mid-July.
About $275 billion (about SDR 193 billion) of the new allocation will go to emerging markets and developing countries, including low-income countries.
What are SDRs
Created in 1969, SDRs are not a currency and have no material existence.
Their value is based on a basket of five major international currencies: the dollar, the euro, the pound, the renminbi or yuan, and the yen.
Once issued, SDRs can be used either as a reserve currency that stabilizes the value of a country's domestic currency or converted into stronger currencies to finance investments.
For poorer countries, the interest is also to obtain hard currencies without having to pay substantial interest rates.