SBP forex reserves rise to $3.81 billion

KARACHI: Pakistan’s foreign exchange reserves held by the central bank increased by $556 million to $3.81 billion in the week ending February 24, the State Bank of Pakistan said on Thursday.

The country has $9.26 billion in reserves in total, including $5.45 billion held by the commercial banks.

The SBP attributed a $700 million commercial loan disbursement from China to the increase in foreign exchange reserves. Due to the nation’s repayment of its external debt, the entire $700 million inflow amount did not appear in reserves.

Reserves are only sufficient to cover less than one month of imports.

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 International Monetary Fund (IMF) loan programme.

The SBP in a monetary policy statement said that the current account deficit has 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 percent), 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 emphasised the importance of completing IMF’s 9th review, which will reduce market uncertainty and unlock further flows from multilateral and bilateral institutions, it said.

Commenting on external funding requirements, the SBP’s governor at the post-monetary policy analyst briefing said that out of $23 billion debt repayment in FY2023, $15 billion has been repaid or rolled over.

Remaining external payments in the next 4 months of the fiscal year stand at $4.2 billion, out of which $1.2 billion bilateral commercial loan is likely to be rolled over. So, the net external payment for the current fiscal year comes at $3 billion.

External public-debt maturities in the remainder of the fiscal year ending June 2023 amount to over $7 billion and will remain high in FY2024, according to Fitch Ratings.

Of the $7 billion remaining for FY2023, $3 billion represent deposits from China (SAFE) that are likely to be rolled over, and $1.7 billion are loans from Chinese commercial banks which we also assume will be refinanced in the near future, the briefing said. The SAFE deposits are scheduled to mature in two instalments: $2 billion in March and $1 billion in June.