KARACHI: The United Arab Emirates (UAE) has rolled over its $2 billion deposits with Pakistan for another one year, while the International Monetary Fund (IMF) has also released $ 705 million loan tranche to Pakistan, the State Bank of Pakistan said on Wednesday.

On Wednesday, the SBP revealed two pieces of good news for the country’s ailing economy, ie, release of IMF tranche and rollover of dollar two billion deposits to support the country’s foreign exchange reserves.

The SBP on social media platform “X” has announced that the UAE has rolled over its two deposits of $ 1.0 billion each (total $2 billion) placed with State Bank for another one year. These deposits were maturing in January 2024.

Pakistan last week requested the UAE for the rollover of $ 2 billion deposits to avert depletion in foreign exchange reserves of the country. On Pakistan’s request, the UAE authorities have rollover $2 billion deposits for another one-year, now it will mature in Jan 2025.

In addition, the SBP has confirmed that it has received inflows $ 705.6 million equivalent to SDR 528 million yesterday night from IMF following successful completion of the first review by the Executive Board of IMF under Stand-By Arrangement (SBA).

The Executive Board of the IMF, in its meeting held on Jan 11, completed the first review of Pakistan’s economic reform program supported by the IMF’s SBA. The Board’s decision allowed for an immediate disbursement of SDR 528 million (around $ 705 million).

The IMF and Pakistan authorities reached a staff-level agreement on November 15 on the first review under the SBA and disbursement of tranche was linked with the approval of the IMF Executive Board.

With the release of SDR 528 million, total disbursement under the arrangement surged to SDR 1.422 billion or about $1.9 billion as the first tranche of $ 1.2 billion was released in July 2023. After the disbarment of the second tranche, nearly SDR 828 or $1.1 billion will be left to be disbursed after the next review. The 9-month IMF SBA programme is scheduled to end in the second week of April.

Current disbursement will be reflected in SBP’s foreign exchange reserves for the week ending on 19th January 2024. However, it is being estimated that with the arrival of these inflows, the SBP’s reserves are likely to reach $ 8.8 billion mark, if no major external debt payment is made. The SBP’s reserves stood at $8.155 billion as of Jan 5, 2023.

Pakistan’s 9-month SBA was approved by the IMF Executive Board on July 12, 2023, in the amount of SDR 2.250 billion or about $3 billion at the time of approval, aims to provide a policy anchor for addressing domestic and external balances and a framework for financial support from multilateral and bilateral partners.

During the first review, IMF has noted that macroeconomic conditions of Pakistan have generally improved, with growth of 2 percent expected in FY24 as the nascent recovery expands in the second half of the year.

The fiscal position also strengthened in FY24Q1 achieving a primary surplus of 0.4 percent of GDP driven by overall strong revenues. Inflation remains elevated, although with appropriately tight policy, this could decline to 18.5 percent by end-June 2024.

The IMF also expected the current account deficit to be around 1½ percent of GDP in FY24 and assuming sustained sound macroeconomic policy and structural reform implementation, inflation should return to the SBP target and growth continue to strengthen over the medium-term.

There were a number of positive developments on the economic front on Wednesday. This includes, current account surplus of $ 397 million in December, surge in foreign direct investment by 35 percent in first half of FY24, rollover of $2 billion deposits by UAE and release of$ 705 million by IMF as loan tranche.

Copyright Business Recorder, 2024

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