KARACHI: State Bank of Pakistan Governor Jameel Ahmed believes the $3 billion nine-month Stand-By Arrang­ement (SBA) with the International Monetary Fund (IMF) will bring economic stability, help address inflation and boost dollar inflows.

Talking to the state-run PTV News on Tuesday, Mr Ahmed expressed his satisfaction with the new agreement and found it a catalyst for the increase in the remittances and export proceeds.

He said inflation and foreign debt servicing were serious issues, adding that the IMF deal would change the sentiments of the market and other stakeholders of the economy.

He was sure that economic stability will have a positive impact on foreign exchange reserves. He said the country timely met all foreign debt repayment obligations during FY23 and still has over $4 billion in SBP’s account.

He said the term sovereign default was overplayed while there was no such situation. In reply to a question, the governor said only the market determines the exchange rate, adding that the central bank has a stated policy about the exchange rate mechanism and will continue to monitor the situation.

The SBP has been under criticism over ‘managing’ the exchange rate.

Under the Staff-Level Agreement, the IMF has asked the government to maintain a single exchange rate. One of the main reasons for this allegation of managing the exchange rate was the State Bank’s strong grip over imports. Opening a letter of credit remained the biggest problem for the importers but it helped the State Bank to curtail outflows of dollars.

However, despite this tough policy the country had to face a $27.5bn trade deficit in FY23.

Reports that appeared in the media suggest that the government has relaxed all import-related restrictions on the IMF direction to secure a deal.

In reply to another question about the appreciation of the rupee, the SBP governor said it was due to higher inflows of remittances and export proceeds.

Published in Dawn, July 5th, 2023