SBP’s forex reserves fall on debt payments, but IMF and UAE offer relief

However, positive economic developments in recent weeks should bolster forex reserves, further improve Pakistan's external account

By Our Correspondent
January 19, 2024
A foreign currency dealer counts US dollar bills at a shop in Karachi on February 25, 2022. — AFP

KARACHI: The foreign exchange reserves held by the central bank fell by $127 million to $8.027 billion in the week ending January 12 due to the repayment of foreign debt, the State Bank of Pakistan (SBP) said on Thursday.


The country's total reserves decreased by $112 million to $13.145 billion. However, the reserves of commercial banks rose by $16 million to $5.118 billion. The SBP's reserves are enough to cover nearly two months (1.96) of imports.

However, positive economic developments in recent weeks should bolster the foreign exchange reserves and further improve Pakistan's external account. In December, the government recorded a $397 million current account surplus, and the SBP received $705.6 million from the International Monetary Fund as the second tranche of a $3 billion bailout.

Furthermore, the United Arab Emirates (UAE) confirmed the rollover of a $2 billion loan, which was maturing this month, for one year, and information technology exports and foreign direct investment in the first half of FY24 showed modest increases.

The IMF’s disbursement will be reflected in SBP reserves for the week ending on January 19, according to the SBP. The IMF executive board completed the first review of Pakistan’s economic reform programme supported by its stand-by arrangement (SBA) and approved the loan last week.

This fresh payout has brought Pakistan's overall IMF disbursement under the SBA to $1.9 billion. The embattled country's economy, which is straining under the huge repayments of its external debt, will receive some respite from financial support from the IMF and the UAE. In addition, this bodes well for the nation ahead of the elections that take place next month.

The SBP reserves are expected by analysts to have risen to $8.9 billion, the highest level since October 28, 2022, following the IMF release. Furthermore, the UAE's $2 billion deposit rollover will assist the nation in covering its FY24 external funding shortfall. The substantial repayment of foreign debt will pose ongoing hurdles for the already shaky economy of the country. In this fiscal year, Pakistan is required to repay $24.6 billion in foreign loans.

The IMF expects Pakistan’s gross reserves to be $9.1 billion by June 2024, up from its earlier estimate of $8.9 billion. Analysts anticipate reserves to be $8-10 billion by June 2024.