Germany

Exchange

Tax

Cars

Pakistan’s forex reserves further increase by $106 million


Pakistan’s forex reserves

ISLAMABAD:  The State Bank of Pakistan said on Thursday that the State Bank of Pakistan’s foreign exchange reserves further increased $10.08 billion, bringing the total government reserves to $10.808 billion.

It said that commercial banks total reserves stand at $5.239 billion. As of October 4, the total foreign exchange reserves stood at $16.47 billion, it said.

Last week, the SBP said that it received the first tranche of $1.03 billion from the International Monetary Fund (IMF) under the 37-month Extended Fund Facility.

This inflow comes as part of the 25th IMF programme that Pakistan has undertaken since 1958.

The new 37-month Extended Fund Facility (EFF) of $7 billion was agreed upon in July 2024 to help Pakistan stabilize its economy amid a worsening economic crisis.

The programme aims to bolster the country’s foreign exchange reserves, reduce fiscal risks, and restore macroeconomic stability.

IMF Loan and Key Conditions

Pakistan’s new IMF loan agreement comes with stringent conditions, following the country’s commitment to enhance its fiscal discipline.

To qualify for the programme, Pakistan had to impose additional taxes amounting to Rs1.8 trillion, increase electricity prices by as much as 51 per cent, and ensure transparency in managing its Sovereign Wealth Fund.

These measures aim to reduce the fiscal burden and improve the economic environment for private sector-led growth.

This programme differs from previous agreements by extending its scope to provincial budgets, marking a shift from prior IMF engagements.

Provinces are now required to align agricultural income taxes with federal corporate tax rates by 2025.

Furthermore, the programme mandates a primary budget surplus of 4.2 per cent of GDP over the three-year period to ensure sustainable debt reduction.

Amid concerns about the nation’s debt burden, which consumed 81 per cent of Pakistan’s tax revenues in the last fiscal year, the IMF refrained from addressing the pressing issue of debt restructuring in this package.

However, the programme sets out strict measures to maintain fiscal discipline and curtail non-interest expenditures.

This IMF package is seen as critical to preventing an economic collapse, with Pakistan struggling inflation, political instability, and diminishing foreign reserves.

The loan comes with a hefty 5 per cent interest rate, adding pressure on the government to implement reforms efficiently while managing external debt and maintaining political stability.

You May Also Like