The AIIB has transferred $500 million to Pakistan, according to the finance minister.
Monitoring Desk
ISLAMABAD: 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.
APP adds: Minister for Finance Ishaq Dar Tuesday sought the support of Bank of China and asked the Bank’s President for expansion of business relations with Pakistan to deepen the economic and financial relations.
In a virtual meeting with President Bank of China Liu Jin, the minister shared that it has always been great pleasure to work with Bank of China and Pakistan has enjoyed sound financial dealings with the bank.
The Finance Minister also highlighted the recent visit of Prime Minister of Pakistan to China and talked about reciprocation of warm sentiments from Chinese leadership.
SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Mehmood Pasha, Special Secretary Finance and other senior officers from Finance Division attended the meeting.
The Finance Minister, while talking about the long standing and durable relationships between government of China and Government of Pakistan, shared gratitude to President, Bank of China for continuous support to Pakistan in testing times.
It was shared that Bank of China has played a crucial role in extending budgetary support to Pakistan which has played a significant role in easing pressure on the external account and meeting budgetary needs.
The Finance Minister extended invitation to President Bank of China to visit Pakistan. He briefed the President Bank of China about the financial and fiscal conditions inherited by the present government and shared that present government has strong resolution to bring back the macroeconomic stability.
The President Bank of China also highlighted the historical and bilateral ties between both countries and appreciated the Government of Pakistan for taking the necessary measures for easing the lives of masses in the country. He also acknowledged the contribution of Pakistan in supporting China during hard times.
He also commended the ongoing facilitation being provided by the government of Pakistan on various Chinese projects under the umbrella of China Pakistan Economic Corridor (CPEC).
The Finance Minister thanked the President Bank of China for continuous support and assured him of same support by the present government in deepening the economic, trade and investment cooperation.
In another meeting with a delegation of institutional investors here, the minister said Minister for Finance and Revenue Senator Mohammad Ishaq Dar Tuesday asserted that present government aims at successfully completing the International Monetary Fund (IMF) program and it would also repay the international bonds on time.
He further asserted that present government is committed to honor all of the financial commitments made by the present as well previous government with national and international financial institutions.
The delegation discussed about the economic situation and outlook of the country. The delegation held a comprehensive discussion with the Finance Minister regarding International Monetary Fund (IMF) program, flood related expenditure and losses, market perception and outlook, as well as external account situation.
The Finance Minister welcomed the delegation and assured the delegation that the present government has taken all pragmatic measures to facilitate the business environment in Pakistan. He shared that Pakistan is slowly but gradually moving towards economic stability and it is high time to invest in Pakistan.
It was shared that reconstruction and rehabilitation phase will start in the coming months. The Finance Minister appreciated the friendly countries for their flood relief support.
The delegation comprised of Managing Director Khurram Sheikh and Alia Moubayed from Jefferies, Mahmood Ali Shah Bukhari – CEO K-trade, Vice President Luis Assad Simon Tamborrel from Goldman Sachs Asset Management, Co-Chief Investment Officer James Edmon Craige from Stone Harbor Investment Partners, Portfolio Manager Carl Vermassen from Vontobel Asset Management.
While SAPM on Finance Tariq Bajwa, SAPM on Revenue Tariq Pasha, Special Secretary Finance and other senior officers from Finance Division also attended the meeting.