Despite panic over a plummeting currency and stock markets that continues to be topsy turvy, State Bank of Pakistan (SBP) Acting Governor Dr Murtaza Syed said Pakistan remains in a position to meet its elevated funding needs, while the crucial International Monetary Fund (IMF) bailout programme “puts a lot of daylight between Pakistan and more vulnerable countries”.
“Concerns about Pakistan are being unfairly overblown,” Dr Syed was quoted as saying by Bloomberg. “The recently secured staff-level agreement on the next IMF review is a very important anchor that puts a lot of daylight between Pakistan and more vulnerable countries.”
His statement comes as the local currency saw one of its worst falls in recent times, shedding nearly 7.5% in one week against the US dollar to close near the 227 level on Thursday, amid renewed concerns over inflation and cost of doing business. This was the fifth successive decline for the rupee, all of which were registered after the IMF announced the staff-level agreement.
Weighed mainly by global commodity prices: SBP sees FY23 most challenging for economy
Moreover, foreign exchange reserves continued to decline with SBP-held level hitting $9.329 billion, depleting import cover and raising concerns over balance-of-payments.
As per a SBP presentation made to foreign investors this week, Pakistan needs $33.5 billion during the ongoing fiscal year, while available financing stands at $35.9 billion for the period, added the Bloomberg report.
However, renewed political turmoil has triggered concerns over Pakistan’s ability to finance its requirements, especially in the context of maintaining momentum in economic policies that would keep the IMF programme on track.
Last week, IMF reached a staff-level agreement (SLA) with Pakistan authorities for the conclusion of the combined seventh and eighth reviews of the Extended Fund Facility (EFF). Subject to approval of the IMF Executive Board, the lender would disburse about $1,177 million (SDR 894 million) to Pakistan.
However, it was later reported that the IMF is also assessing Saudi Arabia’s commitment to financing Pakistan before it disburses fresh funds to the country.
“Pakistan is being unfairly branded with other countries that are much more vulnerable,” said Dr Syed.
“This is because there is little discrimination between countries in the current times of panic across markets, which are responding in a broad-brush way to the global commodity super cycle, unprecedented Fed tightening, and geopolitical tensions.”
The story was originally published in Business Recorder on July 22, 2022.