Pakistan paid USD 109 million IMF instalment – Alfalah Securities Limited

Karachi, December 31, 2012 (PPI-OT): Pakistan has made the eighth instalment worth of USD 109 million of IMF’s Stand-By Arrangement (SBA) on December 28, 2012.

According to Alfalah Securities Limited, the repayment would lead to decline in foreign exchange reserves which in turn is likely to put pressure on Pak Rupee parity leading to steeper devaluation of the local currency. However, the receipt of USD 688 million from US under Coalition Support Fund would reverse the situation on external front. United States of America has disbursed USD 688 million to Pakistan for the cost of deployed troops on the border with Afghanistan and to normalize support for the Pakistani military. The receipt of amount from US bodes well for the balance of payment situation as it would provide some cushion to the foreign exchange reserves and may lead to stabilize devaluation of Pak Rupee.

Going forward Alfalah Securities Limited believes that the rupee devaluation is likely to continue unless strong policy reforms are administered to boost economic growth and contain internal and external deficits. Pak Rupee has witnessed an overall devaluation of ~9% in 2012 to date. Alfalah Securities Limited expects further 8% devaluation in 2013, however, Alfalah Securities Limited expects currency to stabilize in 2014 where the IMF loan repayments are almost over and Alfalah Securities Limited may see export to have picked up due to currency devaluation.