Pakistani rupee and foreign exchange reserves are likely to remain under pressure in the days to come, as country would return around $288 million to International Monetary Fund (IMF) under Stand-by Arrangement (SBA) loan facility in next five days.

Sources informed that Pakistan would repay an amount of $144 million to IMF under Stand-by Arrangement (SBA) loan facility today (Thursday) and it would return same amount of $144 million on the first day of next month (April). Another repayment will be made amounting to $533 million in May 2013. “Pakistan will repay $143.7 million to the IMF today (Thursday) for which arrangement has been made”, said Syed Wasimuddin, chief spokesman of State Bank of Pakistan while talking to The Nation on Wednesday. He further said that Pakistan would repay another installment to the Fund on April 1.

The financial experts believe that huge repayments to the Fund would keep Pakistani rupee and foreign exchange reserves under pressure in the days to come. Pakistan foreign exchange reserves currently stand at $12.436 billion (on March 15, 2013) wherein central bank held reserves stand at $7.451 billion and commercial banks reserves at $ 4.985 billion. The rupee fell to an all-time low level of Rs 100 against the dollar in the open market in February 2013 due to repayment of $146 million to the IMF under the SBA loan facility.

Therefore, it is feared that rupee and reserve would come under pressure in the days to come. However, the experts are of the view that the government could lessen pressure on the rupee and forex reserves by utilizing overseas Pakistanis remittances in a judicious manner.
Pakistan has already paid around $3.24 billion against the total loan of $7.80 billion. The rupee is likely to remain under pressure because of IMF repayments as the foreign exchange reserves have declined to $8.5 billion in February.

The country acquired the loan in 2008 after fragile economic conditions and for supporting the economy. Pakistan got a loan of $7.80 billion in March 2008 when the dollar-rupee value was around Rs 64 in the open market. Pakistan has to pay around $1.57 billion in excess against retiring loan with interest and hike in dollar value of $8.53 billion.

The economic experts believed that Pakistan would approach IMF for fresh loan programme due to the current poor economic conditions of the country because of the continuous borrowing by government from State Bank of Pakistan, lowering down foreign reserves, no further direct foreign investment hopes in the next six months and poor law and order situation.

The country’s external account is under extreme pressure since the inflows were negligible during the year 2012, while outflows eroded the reserves. The remaining amount due under the IMF/SBA (standby arrangement programme) until September 2015 is $3,239 million. The remaining repayments to the IMF and other international financial institutes would certainly hit the country’s external position with weak reserves and sharply declining foreign investments.

The government is repaying the loan, $7.6 billion, taken in 2008 under the SBA, which was increased to $11.3 billion, but the country was not eligible for the last two disbursements of $3.2billion due to its failure to comply with the performance criteria. The government failed to bring reforms to the General Sales Tax (GST) and the power sector, which became the reason for suspension of the programme.

Sources said in the next financial year, Islamabad would have to repay $3.4 billion to the IMF. Hence, Pakistan would have no option, but to seek a fresh bailout package from the IMF to remove the possibility of a default.