SBP reserves fall by $354m to $4.24bn

KARACHI: Pakistan’s foreign exchange reserves held by the central bank dropped by $354 million or 7.7 percent to $4.24 billion in the week ending March 24, the State Bank of Pakistan said on Thursday.

The SBP’s reserves are enough to cover one month of imports. Total reserves of the country fell by $323 million to $9.82 billion. The reserves of commercial banks, however, slightly increased by $31 million to $5.57 billion.

The SBP attributed the repayment of external debt to the decrease in forex reserves. Pakistan’s reserves are under increasing strain from external payments. All technical-level talks with the International Monetary Fund (IMF) are over, according to Finance Minister Ishaq Dar. The minister did not, however, provide a timetable for the signing of the agreement. Dar reiterated during a question-and-answer session at the Senate that the IMF wants promises made by friendly countries to be fulfilled. He reaffirmed that the nation would honour its financial commitments. His remarks come a day after Dr Aisha Ghaus-Pasha, Minister of State for Finance, claimed that the staff-level agreement on the 9th review was taking longer than expected because the IMF wanted to independently verify promises from friendly nations like Saudi Arabia and the United Arab Emirates.

In light of the impending danger of Pakistan failing to make its international debt repayments, the government anticipated that the country would soon receive financing from Saudi Arabia and the United Arab Emirates as well. China has granted rollover of $2 billion SAFE (State Administration of Foreign Exchange) deposits for one year. These deposits were 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 in the accounts of the central bank. One of the conditions outlined in the IMF’s Memorandum of Economic and Financial Policies (MEFP) relates to Net International Reserves (NIR), which can only be met after obtaining guarantees from allies to cover a balance of payment gap.

By the end of June, Pakistan assured the IMF, it would increase its foreign currency reserves to $10 billion. The nation must provide guarantees for up to $7 billion from the IMF in order to close the balance of payments gap for this fiscal year.