Pakistan has received $2.75 billion from the International fund (IMF) under its new allocations for member countries to fight against Covid-19 challenges, the financial institution reported on Tuesday.
The latest receipt is predicted to lift the country’s foreign currency reserves to an all-time high of $20.4 billion
The Washington-based global lender released the funds for Islamabad under its historic funding of $650 billion for the developing and developed member countries.
The new allocations are aimed toward elevating the member countries’ exchange reserves to reinforce their capacity to form international payments for imports and foreign debt repayments also enhance the pace of worldwide economic recovery from the impact of the continued health crisis.
The inflows haven’t only improved Pakistan’s capacity to form international payments but also enhanced its ability to arrest the present depreciation in the rupee against the US dollar and other major currencies of the planet.
Pakistani currency depreciated to over a 10-month low at Rs164.43 against the US dollar within the inter-bank market on Monday.
Following a fresh drop of Rs0.25 on Monday, the rupee has depreciated by 6.39% within the current financial year (since July 1) so far and seven .98% since it hit 22-month high of Rs152.27 in May, consistent with the central bank’s data.
This was the second time that IMF allocated funds for its member countries amid Covid-19 outbreak to cope up with the contagion.
In April 2020, it disbursed $1.4 billion to Pakistan.
The country’s exchange reserves stood at $17.63 billion within the week ended August 13, 2021.
The reserves peaked at $19.46 billion in October 2016.
The board of governors of the IMF approved a general allocation of Special Drawing Rights (SDRs) like $650 billion (about SDR 456 billion) on August 2, 2021, to spice up global liquidity.
“This may be a historic decision – the most important SDR allocation within the history of the IMF and an attempt within the arm for the worldwide economy at a time of unprecedented crisis,” IMF director Kristalina Georgieva said within the statement issued on August 2. “The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence and foster the resilience and stability of the worldwide economy. it’ll particularly help our most vulnerable countries struggling to deal with the impact of the Covid-19 crisis.”
The Pakistan’s exchange reserves are on the increase for the past two years on the rear of strong inflow of workers’ remittances, improvement in export earnings, and growth in investment by non-resident Pakistanis in assets within the homeland through the Roshan Digital Accounts (RDAs).
Besides, the country’s reserves are partly maintained through despots from friendly countries like Saudi Arabia , Qatar, and China and thru the central bank’s short-term borrowing from commercial banks operating within the country.
Almost half the foreign currency reserves “are filled by long-term borrowing from international financial institutions, friendly countries, and short-term borrowing,” Economist Shahid Hasan Siddiqui said the opposite day.
The financial institution said late last month that the imports may still remain high during the present financial year 2021-22, meaning demand for US dollars may remain high.
The depository financial institution of Pakistan (SBP) projected the present account deficit to extend to 2-3% of GDP in the current financial year 2021-22 compared to a 10-year low at 0.6% of GDP recorded within the prior financial year 2020-21.
It, however, said the deficit at 2-3% is sustainable. this is able to allow the economy to grow by 4-5% in FY22 compared to 4% in FY21.