SBP’s forex reserves fall to $7.95bn

KARACHI: The central bank’s foreign exchange reserves sharply dropped by $956 million or 10.7 percent in the week that ended November 4 due to payments of foreign debt, it said on Thursday.

The forex reserves held by the State Bank of Pakistan (SBP) stood at $7.95 billion. The reserves cover almost five weeks of imports. Pakistan’s total foreign reserves fell by $958 million or 6.5 percent to $13.72 billion. The reserves held by the commercial banks declined by $2 million to $5.76 billion.

The SBP attributed a fall in the reserves to external debt servicing. “Major external debt repayments executed during the week include repayment of GoP [Government of Pakistan] commercial loans. Refinancing of these loans is in the process, which will improve foreign exchange reserves in coming weeks,” it said in the statement.

Pakistan is facing a balance of payments crisis and the position of forex reserves is worsening day by day. The reserves remained under pressure, despite the receipt of $1.5 billion from the Asian Development Bank (ADB) last month. “The government has said that the drop in reserves is due to repayment of commercial loans, and it is saying that they would be refinancing these loans which would improve the reserves going forward,” said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.

“It should be kept in mind that the drop in reserves is not due to current account deficit and due to repayment of loans, which would be compensated by additional borrowing,” he added.

Pakistan is expected to receive inflows from bilateral and multilateral lenders, which will not only help the country meet its debt obligations but also improve foreign exchange reserves.

China and Saudi Arabia have given assurances to Pakistan for providing a financial package of $13 billion, including the rollover of sovereign loan deposits, additional rollovers, commercial loans and increasing oil facility on deferred payment in line with the International Monetary Fund agreement.

Saudi Arabia’s Crown Prince Mohammed bin Salman is scheduled to visit Pakistan this month during which Islamabad hopes to get a $4.2 billion bailout package from Riyadh.

Pakistan will receive $500 million as co-financing for the BRACE development programme from the Asian Infrastructure Investment Bank (AIIB), the country’s finance minister Ishaq Dar said on Wednesday.

“These funds will be received by the State Bank of Pakistan within November 2022,” Dar said in a tweet. The SBP tightened controls to stem foreign currency outflows, which would help ease pressure on the forex reserves.

The SBP on Tuesday lowered foreign currency cash-carrying limits for travel purposes and imposed an annual limit of $30,000 per person on card-based cross-border transactions. As per the revised limits, individuals with age 18 years and above (adults) can now take out of Pakistan foreign currency (FCY) equivalent to $5,000 per visit. Previously, a person travelling overseas was permitted to carry a total of $10,000 in foreign cash.