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(MANEND NEWS): Finance Minister Ishaq Dar on Tuesday announced that the Asian Infrastructure Investment Bank (AIIB) has pumped $500 million into the State Bank of Pakistan (SBP) as part of programme financing.
The forthcoming repayment of $1 billion by Pakistan for a maturing Sukuk on December 5, 2022, has kept the rupee under pressure against the US dollar as the foreign exchange reserves have continued to deplete over the past 11 months.
Last week, the domestic currency inched down by 0.05% (or Rs0.11) to a new six-week low at Rs223.92 against the greenback in the inter-bank market.
A market expert had pointed out that the forthcoming repayment of $1 billion had built pressure on the rupee. Earlier, the delay in the International Monetary Fund’s (IMF) ninth review of its $6.5 billion loan programme had led to the rupee’s depreciation for the second consecutive working day.
The delay in IMF’s review has blocked new loan inflows as most of the multilateral and bilateral creditors including the World Bank, AIIB, China and Saudi Arabia were waiting for the clearance of the review.
The international money lender has asked Pakistan to reduce expenses before talks on the ninth review of a $7 billion loan programme, local media reported on Monday, citing sources.
The finance ministry had said that it would “expeditiously” finish the technical engagement with the IMF as part of the ninth review of the programme, but a firm date for the review completion is yet to be announced.
The funds will be a lifeline for the country, which is struggling to convince international markets and ratings agencies that it has the funds to meet external financing requirements, including debt repayments.
Pakistan has a $1 billion international bond repayment due early next month. Its total foreign reserves with the central bank stood at $7.9 billion as of last week.
However, earlier this month, Federal Minister for Planning Development and Special Initiatives Ahsan Iqbal had categorically dismissed rumours of the country facing the risk of default, terming it “Pakistan Tehreek-e-Insaf’s (PTI) propaganda” for mere politicking.
While addressing the Pakistani community at the Pakistani Consulate in Jeddah, where a large number of overseas Pakistanis had assembled, the minister said that the country had adopted a path of stability and the government had saved it from heading towards default.
Moreover, Dar had said that Bloomberg has pitched Pakistan’s one-year probability of default at a low of 10 per cent.
In a tweet, the minister said the default probability was quite opposed to a highly dubious number of 93 per cent circulated by an unscrupulous local political leader a few days ago.
The minister also shared on his Twitter account the graph of Bloomberg’s Estimated Default Probability in Emerging Markets (One-year probability of default).
However, against strong market expectations for maintaining the status quo, the central bank had surprisingly hiked its key policy rate by 100 basis points to over a two-decade high at 16% to curb the elevated inflation reading and achieve a “higher growth on a more sustainable basis”.
The SBP revised up its projection for average inflation reading to 21-23% for the current fiscal year 2023 compared with the earlier 18-20%.
“This [rate hike] decision is aimed at ensuring that elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis,” the SBP had announced in a statement issued after the end of its monetary policy meeting.