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.
Current account posts $773m deficit in July
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.
Pakistan's net international reserves set to increase: SBP governor
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.