Pakistan has to repay as much as $263 million (equalling Special Drawing Rights (SDRs) 175.6 million) against the Stand-By Arrangement (SBA) and Extended Credit Facility (ECF) to the International Monetary Fund (IMF) by June 28.
Follow up:
The upcoming payments, which include two instalments of SBA and one instalment of ECF, is likely to result in a drastic cut in the country's fast depleting foreign exchange reserves, already hit by rising foreign debt payments and slow inflows of foreign funds.
According to the repayment scheduled, the 15th and 16th instalments of the SBA loan are due on June 28 this year. Pakistan has to pay as much as SDR 167 million to IMF on account of the next two repayments of the SBA program. In dollar terms, this amount is calculated to be nearly $250 million. Moreover, one instalment amounting to SDR 8.614 (nearly $13 million) of ECF is also due on the same day.
Pakistan availed long-term SBA loan program from IMF in October 2008 to avoid default after the country's reserves touched the lowest level following higher current account deficit. The repayment of SBA began in February last year and so far, Pakistan has successfully paid 14 instalments to the IMF. Pakistan paid the 14th SBA instalment amounting to $385.6 million to the Fund on May 24 this year.
These payments will be the last payments for this fiscal year: the next repayment is scheduled in July this year. An ECF payment of SDR 17.22 million is due on July 9, while three SBA payments are scheduled in August.
Sources said that despite some challenges in terms of forex reserves, Pakistan "is still in a position to fulfil its foreign debt obligations". They said that upcoming payments would be paid from reserves held by the State Bank of Pakistan (SBP), are part of the principal amount of the loan, while interest is already being paid on a quarterly basis.
"Despite several challenges Pakistan has paid all instalments on time...the next payments will (also) be on time," they said.
Sources said that ongoing external debt repayments mainly to the IMF had caused a dip in Pakistan's liquid foreign exchange reserves, which are currently at the lowest level since July 2009.
The country's total forex reserves declined to $11.3 billion on June 14 this year, down from $15.3 billion at the end of June last year. A major decline of $1.6 billion occurred in the third quarter of the current fiscal year, primarily impacting SBP reserves.
At present, the country's liquid foreign exchange reserves are equivalent to 3.5 months of imports, slightly higher than the rule-of-thumb of 3 months of imports. Pakistan is also considering joining another IMF program aimed at strengthening the depleting reserves. The previous IMF program was signed in October 2008 when the liquid forex reserves stood at $9 billion, equivalent to 12.2 weeks of imports.
The external debt owed to multilateral institutions - the IMF and Paris Club - forms 71.2 percent of Pakistan's stock of total external debt and liabilities at the end of March this year.
On the whole, Pakistan's external debt and liabilities (EDL) posted a decline of $4.6 billion during July-March of FY13 mainly because of the scheduled repayments to the IMF and some gains from the appreciation of US dollar.
Pakistan re-joined IMF program in October 2008 to avoid default. But the SBA program could not be completed, as Pakistan failed to meet IMF conditions. As a result, this program expired in September 2011. The last SBA tranche was received on September 17, 2010.
Of the total agreed amount of SDR 7.236 billion ($11.35 billion), Pakistan received SDR 4.936 billion ($7.433 billion).
According to the repayment schedule, the country will repay total loan to the IMF by the end of the fiscal year 2014-15.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement the existing official reserves of member countries. SDR's rate is fluctuating: one SDR is equivalent to 1.5 US dollar.
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