KARACHI, Pakistan, July 13 (Reuters) – Pakistan’s central bank has received $1.2 billion from the International Monetary Fund as the first tranche of a $3 billion bailout to stabilise the economy, Finance Minister Ishaq Dar said on Thursday, a day after the IMF’s board approved the package.
Having been teetering on brink of a sovereign debt default, Pakistan earlier this week also received $1 billion from the United Arab Emirates and $2 billion from Saudi Arabia, as both governments were reassured by the agreement struck between Islamabad and the IMF at the end of June.
In a televised address, Dar said the first installment of the IMF money has arrived in the State Bank of Pakistan’s account.
Pakistan’s sovereign bonds and rupee gained on Thursday, following the IMF board’s approval.
The Pakistan rupee rose 1% to 274.5 per dollar in the interbank market, though it had been up by as much as 2% in early trade.
Pakistan’s sovereign dollar bonds gained as much as 1.7 cents, Tradeweb data showed on Thursday. A bond maturing in 2027 rose 1.75 cents to hit a 10-month high of just over 53 cents on the dollar by 0629 GMT, while a 2024 maturity was trading just under 80 cents, its highest in more than a year.
In a statement, the IMF said the rescue programme will focus on an appropriately tight monetary policy aimed at curbing price pressures.
The IMF expects inflation to average 25.9% in the fiscal year 2024, though it expects a substantial moderation to around 16% towards the end of the year.
With the key policy rate at 22%, the government has projected inflation at 21% for fiscal 2024.
“A continued tight, proactive, and data-driven monetary policy is warranted going forward,” said the fund.
The ailing South Asian economy has faced an acute balance of payments crisis with only enough central bank reserves to cover barely a month of controlled imports. The IMF projects it will
would have an import cover of 1.4 months in fiscal 2024.
The deal, a lifeline for Pakistan, which has been on the cusp of default, came after eight months of tough negotiations over fiscal discipline.
“A market-determined exchange rate is also critical to absorbing external shocks, reducing external imbalances, and restoring growth, competitiveness, and buffers,” the fund said.