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Saudi Arabia, UAE, Qatar and China confirm to IMF of completing arrangements for $4bn to be in Pak account before August 31
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ISLAMABAD: The International Monetary Fund (IMF) has convened a meeting of its executive board on August 29 to approve a bailout package for Pakistan, including disbursement of about $1.18bn, before the close of current month.
The move follows the completion of the $4 billion in bilateral financing from four friendly nations and would pave the way for an immediate disbursement, expected to be in Pakistan’s account before the end of working hours on August 31.
Sources said the executive board would meet on August 29 to take up Pakistan’s case for approval of the completion of seventh and eighth reviews of the Extended Fund Facility (EFF), besides a $1bn increase in size of the programme to $7bn and the extension of its tenure to August 2023.
Sources said the board meeting was convened after Saudi Arabia, the United Arab Emirates, Qatar and China confirmed to the IMF that they had completed arrangements for $4bn in bilateral financing to Pakistan, which was the last hitch to the bailout package after completion of all the prior actions agreed under the SLA. The IMF board’s clearance was expected to reverse continuously depleting foreign exchange reserves, strengthen Pakistani rupee and support balance of payments.
With increase in petroleum development levy on oil products on July 31, the IMF had publically confirmed that Pakistan had completed all the prior actions for revival of its programme but had linked the approval of disbursement of $1.18bn funds by its executive board to confirmation of $4bn additional inflows from the four friendly countries.
Since then, the rupee had been recovering against the dollar, from about Rs240 per dollar to less than Rs216 at present, and stock market had been showing robust activity following months of downturn. The exchange rate had been under continuous pressure amid declining foreign exchange reserves, mainly due to delay in formal commitment by the friendly countries.
The finance minister had earlier claimed to have lined up $8.5bn-$10bn inflows from the friendly countries against a financing gap of $4bn estimated by the IMF, but at the same time blamed political turmoil in the country for steep currency depreciation and bullish stock market.
The IMF had announced on July 13 a much-awaited staff-level agreement with Pakistan on nine-month extension in tenor and $1bn increase in size of the bailout package to $7bn, including upfront disbursement of about $1.18bn.
Its approval from the IMF executive board was, however, linked to a series of prior actions that the government fulfilled over the past two weeks.
Saudi fund
Saudi Arabia is planning to renew its $3 billion deposit to help Pakistan manage its ongoing current-account crisis and fight rising inflation, Bloomberg reported, quoting people familiar with the matter.
The Kingdom also aims to provide $100 million per month for 10 months in petroleum products as an additional support.
Sources who asked to remain anonymous said that Pakistan’s funding gap has been covered after the Kingdom’s commitment, adding that the assurance will pave the way for an International Monetary Fund’s loan approval at the end of the month.
They also revealed that Saudi Arabia has been coordinating with the IMF to ensure that Pakistan is always offered complete support. One of the sources said that the commitment is likely to be announced within the next two days.
UAE to invest $1 billion in Pakistan
The UAE announced on Friday it was to invest $1 billion in Pakistani companies in various economic and investment sectors, state news agency WAM reported, citing an official source in Abu Dhabi.
“The move aims to explore new investment opportunities and areas for cooperation in projects across various sectors, so as to expand bilateral economic relations in the best interest of the two countries,” the statement said.
It also stresses both countries’ keenness to continue cooperation in various fields, including gas, energy infrastructure, renewable energy, health care, biotechnology, agricultural technology, logistics, digital communications, e-commerce and financial services.
New taxes and arrangements
In the first mini-budget of this fiscal year, the government on Thursday announced fresh revenue measures of more than Rs50 billion and lifted a ban on all non-essential, or luxury, imports to meet yet another lateral demand of the International Monetary Fund (IMF) before it clears Pakistan’s bailout package later this month.
Addressing a press conference in the federal capital on Thursday, Finance Minister Miftah Ismail said Rs36bn worth of additional tax had been imposed on cigarettes and tobacco and about Rs14bn would come from changes in the retailers’ tax regime.
He said some of the other proposed tax relief measures for real estate, capital markets, banks and so on had been postponed for now.
The minister said Pakistan had completed all conditions and prior actions required by the IMF under the 7th and 8th reviews for the disbursement of $1.18bn and complied with an additional funding arrangement of $4bn from Qatar, Saudi Arabia and the United Arab Emirates and re-rolling of payable debt by China.
“However, the Fund wanted clarity on certain issues,” the minister said and explained that the import ban was imposed on May 19 for two months to control the outflow of scarce foreign exchange. However, the import ban issue could have been raised by the World Trade Organisation (WTO) with which the IMF worked very closely, he said, adding that this was why the Fund wanted the ban removed.