KARACHI: The State Bank (SBP) said on Wednesday it has received the recently approved $1 billion from the IMF under the Extended Fund Facility (EFF).
This was the second tranche of $1bn under the EFF, which supported the fragile reserves position of the central bank and also paved the way for other resources. The IMF has become the biggest source for inflows into the country after remittances.
The financial sector said the IMF’s inflow had relieved the country’s finances of the stress it was facing because of the Indian aggression.
Experts said war always creates uncertainties, but this time it was short and precise, strengthening Pakistan’s image in the region as well as in the global market. They said India had been trying hard for years to prove that Pakistan’s weak economy won’t allow it to stand up to India. But Pakistan’s measured, lethal response to India has debunked India’s propaganda.
Experts confident recent infusions will stabilise exchange rate
“The message for investors is that Pakistan is a strong country and your investments are safe here,” said a senior banker.
Pakistan has been facing a tough time on the external funding front (external debt services), but recent inflows from the IMF and friendly countries have come as timely remedies.
“The receipt of $1bn from the IMF will keep the exchange rate stable — a key to foreign investment and the stability of exchange rate,” said Zafar Paracha, General Secretary of the Exchange Companies Association of Pakistan. He was hopeful that foreign direct investment would get a fillip after the short-lived war as it had improved Pakistan’s image.
With the infusion of IMF’s $1bn, the State Bank’s total reserves will reach $11.33bn, but still it is way behind the revised target of $14bn. The central bank’s reserves were $10.33bn on May 2.
The bank says the latest inflow would be shown on the May 16 balance sheet. The SBP had revised the target from $13bn to $14bn after remittances exceeded estimates by 33 per cent.
Remittance target revised
The target for remittances was revised as well — from $35bn to $38bn for FY25. The inflows remained higher during the entire fiscal year. Financial experts believe the revised target of $38bn is achievable.
“This inflow has come at an opportune time because due to the recent turmoil, export proceeds had substantially slowed down. While the fundamentals for Pakistan are intact, it faces strong headwinds from tariffs, geopolitical turbulence, and challenging export conditions,” said Faisal Mamsa, CEO of Tresmark.
The international lender has also allowed an additional arrangement for the $1.4bn Resilience and Sustainability Facility.
“Another inflow of climate financing will further boost reserves and counter steep debt repayment,” said Mr Mamsa.
The IMF, in a statement issued on May 9, said this decision allows for an immediate disbursement of around $1bn, bringing total disbursements under the arrangement to $2.1bn.
Published in Dawn, May 15th, 2025
