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Pakistan's forex reserves to reach $4.3 billion next week: SBP governor

State Bank of Pakistan Governor Jameel Ahmad blames inflation in Pakistan over surge in global prices due to Ukraine war

March 08, 2023
An undated image of State Bank of Pakistan Governor Jameel Ahmad. — Twitter/@StateBank_Pak
An undated image of State Bank of Pakistan Governor Jameel Ahmad. — Twitter/@StateBank_Pak

ISLAMABAD: State Bank of Pakistan (SBP) Governor Jameel Ahmed says that the International Monetary Fund (IMF) agreement is close to finalisation and that after it, Pakistan's foreign exchange reserves will go up to $4.3 billion.

He made this remark during a meeting of the Senate Standing Committee on Finance held under the chairmanship of Senator Saleem Mandviwala. Other SBP officials also participated and gave a briefing on inflation, interest rates and foreign exchange reserves.

The SBP governor said the inflow of foreign exchange will increase after the agreement with the IMF.

He reiterated that with the improvement in the dollar inflow, the reserves of the central bank will reach $4.3 billion by the end of next week, and the annual inflation rate of this year will be an estimated 26.5%.

Pressure remains on the country’s reserves mainly due to high foreign debt repayments and absence of external financing amid delay in the revival of the IMF loan programme.

The SBP, in a recent monetary policy statement, had said that the current account deficit had seen significant moderation in the first eight months of the current fiscal year to clock in at $3.8 billion. The improvement is mainly attributable to reduction in imports (down by 21%), however, slowdown in export and remittances has diluted some of the benefits arising from lower imports.

The recent turmoil in domestic economy coupled with an uncertain political environment has resulted in lower inflows from multilateral institutions and friendly countries, which was further dented by tight monetary stance adopted by major central banks of the world.

Considering the current situation, the SBP has continued to emphasise on the importance of completing IMF’s ninth review, which it says will "reduce market uncertainty and unlock further flows from multilateral and bilateral institutions".

In the meeting on Wednesday, Senator Mohsin Aziz said their government gave autonomy to the State Bank but they did not use it. "The interest rate and inflation have reached historic highs in Pakistan," he said.

The SBP governor told the committee that the economy is currently facing many external and internal challenges. Placing blame on the war in Ukraine, he said that it [the war] had resulted in an increase in the prices of goods, which has in turn led to inflation. The current account deficit for this year is estimated to be $10 billion, he further shared.

He praised the policy measures of the government and the State Bank, saying that these measures were helping keep the current account deficit "quite low" at the moment. The deficit will be up to $7 billion by the end of the current financial year, he said.

Sharing details on remittances, he said they have decreased by $2 billion this year. "Remittances have decreased from $18 billion to $16 billion," he shared.