SBP’s forex reserves rise to $3.25bn; analysts say ‘reasons unknown’

KARACHI: Pakistan’s foreign exchange reserves held by the central bank slightly increased by $66 million to $3.25 billion in the week ending February 17, the State Bank of Pakistan said on Thursday.

The country has $8.73 billion in reserves in total, including $5.46 billion held by the commercial banks.

The nation is struggling to pay off its extraordinarily high levels of external debt and barely has enough dollars to cover less than three weeks’ worth of imports.

Analysts were once more taken aback by the latest foreign exchange numbers, and were unable to pinpoint the reasons why the reserves had improved during the week under review.

The SBP omitted to explain why the foreign exchange reserves increased.

However, analysts assumed that the reserves were improving due to improvement in remittances and exports.

“The flows have improved on account of remittances and exports. Market sources also suggest that SBP has been buying dollars to shore up reserves,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.

The board of the China Development Bank (CDB) approved a loan facility for Pakistan worth $700 million, and the formalities in this regard have been completed, according to Pakistan's Finance Minister, Ishaq Dar.

The money, which would bolster the country’s diminishing foreign exchange reserves, is expected to arrive at the State Bank of Pakistan this week, Dar said on his official Twitter account on Wednesday.

Pakistan government hopes to reach a staff-level agreement with the IMF this week. However, the global lender would need another one and a half months before calling a board meeting and approving the $1.1 billion tranche.

Pakistan has taken painful fiscal consolidation measures to unlock funding from a $6.5 billion IMF bailout. Experts believe that even with the IMF programme resumed, it was unlikely that the nation’s economy would get back on track.

Continued programme performance and funding are subject to significant risks, especially in the run-up to this year’s elections. A debt readjustment is becoming a greater possibility sometime around 2023-2024.

Pakistan’s external debt servicing obligation for FY2023 is $23 billion, of which $6 billion has been repaid and $4 billion rolled over, leaving $13 billion yet to be funded.

The country also has further repayment obligations of $75 billion during FY2024-2026.