SBP forex reserves inch up $280m to $4.6bn

KARACHI: Foreign exchange reserves held by the State bank of Pakistan increased by $280 million to $4.598 billion in the week ending March 17, it said on Friday. 

The SBP’s reserves are enough to cover only one month of imports. The total reserves of the country rose by $293 million to $10.139 billion. The reserves of commercial banks increased by $13 million to $5.540 billion.

The central bank attributed a $500 million loan refinancing from China to the increase in foreign exchange reserves. Due to repayments of external debt, the entire amount did not reflect on the forex figure.

China recently refinanced commercial loans to prevent Islamabad from a default. China has granted rollover of $2 billion SAFE (State Administration of Foreign Exchange) deposits for one year. The deposits had matured on March 23. The $1 billion Chinese deposit will mature in June. Beijing has agreed to refinance the $2 billion in foreign commercial loans and has already transferred $1.7 billion to the accounts of the central bank.

The rollover of Chinese SAFE deposits was one of the conditions set forth by the IMF in order to fulfill the Pakistan’s need for external funding and advance toward the long-awaited staff-level agreement.

In the final quarter (April-June) of the current fiscal year, $3 billion in Pakistan's external debt commitments will be repaid. An IMF official said on Friday that a few outstanding issues, including a proposed fuel pricing scheme, needed to be resolved before Pakistan and the IMF sign a long-awaited loan deal. Since early February, the coalition government and the lender have been negotiating a deal that would provide $1.1 billion to the 220 million-person nation that is severely short on funds.

Pakistan's economy faces multiple challenges including slowing growth, high inflation, and large financing needs, according to the IMF. Julie Kozack, director of communications at the IMF, said in a press briefing on Thursday that timely financial assistance from external partners would be critical to support the authorities' policy efforts and ensure the successful completion of the ninth review of the Extended Fund Facility (EFF).

Aside from support provided by the IMF, Pakistan's, EFF supported programme receives financing from other multilateral institutions, including the World Bank, the Asian Development Bank, and the Asian Infrastructure Investment Bank, and bilateral partners, notably China, Saudi Arabia, and the UAE, according to Kozack. “So, we do need to ensure that we have those financing assurances in place in order for us to be able to take the next step with Pakistan,” she said.