Islamabad (LTN NEWS): The State Bank of Pakistan (SBP) and the Ministry of Finance have said that Pakistan’s gross financing needs for the current fiscal year will be more than fully met by the current International Monetary Fund (IMF) program. In addition, an extra cushion of $4 billion will be set up.
In a joint statement released on Sunday, it was said that the country needed money because it had a current account deficit of $10 billion and had to pay back about $24 billion in debt to other countries.
It said, “In order to strengthen Pakistan’s foreign exchange reserves, it is important for Pakistan to have a little more money than it needs.” So, in addition to the $1.2 billion that the IMF plans to release in the next few weeks, $4 billion in funding commitments were being made through a number of different channels, including friendly countries.
In the statement, it was said that Pakistan’s problems were short-term and were being dealt with in a strong way. The Reserve Bank of Pakistan (SBP) and the Ministry of Finance (Finance Ministry) both pointed out that the country’s foreign reserves have gone down since February because outflows have been greater than inflows, and the exchange rate has come under pressure.
“There hasn’t been much money coming in because the next review of the IMF program hasn’t been finished yet. This has been going on since February because of policy slips. On the other hand, when it comes to outflows, debt servicing on foreign borrowing has kept going as payments on these debts have come due during this time.
On the other hand, the statement said that the exchange rate had been under a lot of pressure, especially since mid-June, because of a general tightening of the USD, a growing current account deficit, a drop in reserves, and a worsening of sentiment because of the delay in the IMF agreement and domestic politics.
It said that an agreement with the IMF had been reached at the staff level last month, and that the ruling coalition had also said it would finish its term.
The Reserve Bank of India (SBP) and the Ministry of Finance (Finance Ministry) said that about half of the fall in the value of the rupee since December 2021 was caused by the rise in the value of the dollar around the world. The other half was caused by factors in India, such as the widening current account deficit.
“The remaining drop in value has been too much and is based on emotions. The rupee has gone up too much because people are worried about politics at home and the IMF program. This uncertainty is being cleared up, so the part of the rupee’s drop that was caused by people’s feelings will also stop over the next few months.
In this regard, the statement talked about the role of the central bank, saying that it sold dollars when the market got crazy and took steps to stop speculation by closely watching and inspecting banks and exchange companies.
It put an end to rumors that the government and the IMF had agreed on a certain exchange rate. “The exchange rate is flexible and set by the market, and it will stay that way,” said the SBP and the finance ministry. They also said that any unruly movements are being stopped.
The statement said that everyone “fully expected” the rupee to go up because the current account deficit had gone down and people were feeling better. It also said that the rupee had gotten stronger in 2019 after the IMF program began, which was the opposite of what had happened before.
“It’s clear that the rupee can temporarily go too high, as it has recently. But over time, it goes both ways. We think that this pattern will continue in the next few months.
“As a result, the rupee should get stronger in line with better fundamentals, like a smaller current account deficit and a better mood,” it said.
