ISLAMABAD/WASHINGTON: The government received $2.75 billion from the International Monetary Fund under a Special Drawing Rights programme to support low-income countries hit by the coronavirus, the State Bank of Pakistan said Tuesday.
The funds, part of a multi-billion-dollar global programme, will shore up foreign reserves, under pressure from a rise in the current account deficit.
Pakistan will get an additional $2.7 billion in funding as the International Monetary Fund will distribute about $650 billion in new Special Drawing Rights to its members, Managing Director Kristalina Georgieva said late on Monday.
Kristalina Georgieva, the agency’s managing director, had announced a day earlier to distribute about $650 billion to its members, providing a “significant shot in the arm” for global efforts to combat the pandemic.
Under the programme, the member countries will receive SDRs — the fund’s unit of exchange backed by dollars, euros, yen, sterling and yuan — in proportion with their existing quota shareholdings in the fund.
To spend their SDRs, countries would first have to exchange them for underlying hard currencies, requiring them to find a willing exchange partner country.
Countries can use the SDR allocation to support their economies and step up their fight against the coronavirus crisis, but should not use the fiscal space to delay needed economic reforms or debt restructuring, the IMF said in a separate guidance document.
The move is aimed at providing a “significant shot in the arm” for global efforts to combat the Covid-19 crisis, Georgieva said.
In December 2019, the Fund approved a three-year, $6 billion loan package for Pakistan to rein in mounting debts and stave off a looming balance of payments crisis, in exchange for tough austerity measures.
Past IMF programmes, also requiring Pakistan to agree to austerity measures, were deeply unpopular with the public. The regime of President Pervez Musharraf had trumpeted its break from this source of finance.
The agency’s largest-ever distribution of monetary reserves will provide additional liquidity for the global economy, supplementing member countries’ foreign exchange reserves and reducing their reliance on more expensive domestic or external debt, Georgieva said.
“The allocation is a significant shot in the arm for the world and, if used wisely, a unique opportunity to combat this unprecedented crisis,” she said.
The IMF underscored its concerns about diverging trends in the global economy and said the new SDR allocation would allow richer countries to help those hit hard by the pandemic while improving the outlook for the global economy.
GEORGIEVA THANKS IMRAN FOR EVACUATING IMF’S AFGHANISTAN OFFICIALS:
Meanwhile, Georgieva thanked Prime Minister Imran Khan Tuesday for the safe evacuation of the agency’s officials from Afghanistan after the Taliban takeover.
She said Pakistan’s efforts at the highest levels amid a complex situation in the war-torn country to help the Fund staffers by securing a safe passage to Hamid Karzai International Airport in Kabul were “absolutely critical” to the evacuation.
“I especially appreciate the instrumental roles played by Pakistan’s ministers for Foreign Affairs, Finance and Defense as well as Governor of State Bank of Pakistan,” she said.
Georgieva further said the lender was grateful for its partnership with Pakistan and looked forward to “continuing our cooperation”.
“We extend our very best wishes to you and your people,” she added.
— With additional input from Reuters
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