SBP reserves dip to $7.8bn, down $70m on debt repayment

KARACHI: Foreign exchange reserves held by the central bank declined by $70 million to $7.779 billion in the week ended September 1, data showed on Thursday.

The country’s total liquid foreign reserves stood at $13.127 billion, including $5.347 billion held by commercial banks, the State Bank of Pakistan (SBP) said in a statement. The SBP attributed the decline in its foreign exchange reserves to debt payments made during the week.

“During the week ended September 1, 2023, SBP’s reserves decreased by $70 million to $7,779 million on account of debt repayments,” it said. Foreign exchange reserves held by the SBP had decreased by $81 million in the previous week, while in a three-week period, the reserves of the SBP decreased by $276 million.

Pakistan has been grappling with the depressed situation of foreign exchange reserves over the last one and a half years, and the total reserves of the country even fell below the $10 billion mark in the last weeks of the previous fiscal year.

The country entered a Stand-By Arrangement (SBA) agreement with the International Monetary Fund (IMF) at the end of the previous fiscal, and had received the first tranche of $1.2 billion from the global money lender out of $3 billion in July, which helped it shore up its foreign exchange reserves.

The IMF program aims to restore macroeconomic stability and support structural reforms in Pakistan, which faces challenges such as low growth, high inflation, large fiscal and current account deficits, and a heavy debt burden.

Pakistan also got inflows from Saudi Arabia and the UAE in July and August, but no significant inflows have followed since then except for rescheduling of loans by Chinese commercial banks.

The country’s external debt repayments for the current fiscal year are slightly less than $24.5 billion, including principal repayment of around $21 billion and interest payments of $3.3 billion.

Out of the $21 billion principal repayments, the central bank expects a rollover of around $11.3 billion, of which $5.3 billion has already been agreed and another $6 billion is expected to be rolled over.

The remaining $10 billion includes $1.5 billion that was repaid in July and $8.5 billion that will have to be repaid further.

The rupee also came under pressure, crossing Rs300 mark against the dollar, on the back of dollar shortages due to debt repayments, rise in import payments after the easing of restrictions, and lack of fresh inflows.