Pakistan has received over $1 billion as the first tranche from the International Monetary Fund (IMF), providing a much-needed boost to its foreign exchange reserves. On Friday, the State Bank of Pakistan (SBP) confirmed the inflow of SDR 760 million, which amounts to $1.027 billion, as part of the IMF’s Extended Fund Facility (EFF). This tranche is part of a larger $7 billion loan package approved by the IMF Executive Board earlier this week.

The inflows are set to be reflected in SBP’s reserves data, expected to be released on October 3, 2024. This injection comes after Pakistan successfully completed a short-term $3 billion Stand-by Arrangement with the IMF earlier in the year.

The IMF’s new 37-month Extended Arrangement under the EFF was granted to stabilize Pakistan’s macroeconomic situation and support long-term structural reforms. These reforms aim to bolster Pakistan’s economy, tackle structural challenges, and drive more inclusive growth. Critical to this plan is the continued financial support from Pakistan’s international partners, according to IMF officials.

Currently, Pakistan’s foreign exchange reserves stand at $14.873 billion, including $9.534 billion held by the SBP and $5.34 billion with commercial banks. Despite significant external debt obligations of $26.2 billion for FY25, Governor Jameel Ahmed expressed confidence that Pakistan would comfortably meet its debt repayment obligations thanks to a combination of improved foreign inflows, remittances, and a lower current account deficit.

Moreover, the SBP has cut its policy rate by 450 basis points since June to aid economic recovery. As Pakistan manages to contain its current account deficit, the central bank expects reserves to reach the $13 billion mark by the end of FY25.