KARACHI, July 9: Pakistan may use the $255 million IMF tranche for payments of external debt most likely ahead of schedule. Sources at the State Bank said that the $255 million received from the IMF as latest tranche of a $1.5 billion Poverty Reduction and Growth Facility would be placed in Sinking Fund.

The central bank last year created this fund with $900 million to make external debt payments. Foreign exchange placed in it does not reflect in official foreign exchange reserves.

Official reserves stood at $12.218 billion on July 3. Early this year, Pakistan used the Sinking Fund in retiring ahead of schedule $1.17 billion expensive loans of the Asian Development Bank.

Finance Minister Shaukat Aziz said in his budget speech that the government would prepay another $400 million loan by the end of 2004, but he did not identify the lenders.

A spokesman confirmed to Dawn that the IMF would transfer to the SBP overseas account by Friday night $255 million as new PRGF tranche, but he did not say anything on how it would be used.

The Executive Board of the IMF had approved late last month the release of 172.28 million SDR (Special Drawing Rights) for Pakistan under SDR 1.034 billion or $1.5 billion PRGF.

With the release of $255 million total disbursement under the PRGF exceeds $2.26 billion. After the release of the last PRGF tranche later this year Pakistan plans to stop borrowing from the IMF.