On Thursday, Jameel Ahmad, Governor of the State Bank of Pakistan (SBP), announced that Pakistan has successfully arranged the $2 billion in external financing required for the International Monetary Fund (IMF) program. This crucial development paves the way for the IMF board’s anticipated approval in the coming months.
The governor’s statement was made during an analyst briefing that followed the SBP’s announcement of a significant 200 basis points cut in the policy interest rate. This reduction, which aims to stimulate economic growth while maintaining stability, reflects the central bank’s commitment to fostering a more favorable economic environment.
According to a brief note from brokerage house Topline Securities, Ahmad emphasized that Pakistan’s external repayments are evenly distributed over the next six months, with no substantial lump sum payments expected apart from rollover amounts. This distribution of payments should ease financial pressures and contribute to economic stability.
In addition to addressing external financing, Ahmad discussed the central bank’s broader economic strategy. He noted that the SBP is focused on achieving sustainable economic growth while ensuring the stability of the external account. The governor expressed optimism about the continued strength of remittances, attributing this to the narrowing gap between formal and informal market exchange rates. This positive trend in remittances is expected to support Pakistan’s economic stability and growth.
Another key point highlighted by Ahmad was the upcoming transfer of dividends from the SBP to the government. The central bank is set to transfer over Rs. 2.5 trillion in dividends from its profits for the fiscal year 2024 (FY24). This substantial transfer will bolster the government’s financial resources and support fiscal stability.
The recent decision by the SBP to cut the interest rate by 200 basis points represents the third consecutive reduction by the central bank, following a cumulative cut of 450 basis points in previous meetings. This policy shift is intended to ease financial conditions, stimulate economic activity, and help achieve the SBP’s inflation and growth targets.
The governor’s briefing comes at a critical time as the country navigates economic challenges and seeks to balance growth with external stability. By securing the necessary external financing and implementing a lower interest rate, the SBP aims to create a more conducive environment for economic growth while managing external obligations effectively.
Overall, the SBP’s actions reflect a strategic approach to economic management, focusing on both short-term stability and long-term growth. The successful arrangement of external financing and the forthcoming transfer of dividends are expected to provide significant support to Pakistan’s economic framework, facilitating continued progress and stability in the months ahead.