SBP reserves rise for third straight week, reach $8.022 billion

KARACHI: The foreign exchange reserves held by the central bank of Pakistan increased for a third consecutive week, reaching $8.022 billion as of March 22, up from the previous week’s $8.018 billion, the State Bank of Pakistan (SBP) said on Thursday.

That is an increase of a slight $4 million from the previous week. The country’s forex reserves rose by $37 million to $13.428 billion. The reserves of commercial banks also increased by $33 million to $5.406 billion.

The SBP’s reserves are sufficient to cover imports for roughly two months. In a weekly statement, the SBP did not provide a reason for an uptick in its foreign reserves, but analysts noted that the bank's foreign exchange reserves were supported by an increase in inflows stemming from dollar purchases from the interbank market and a rise in remittances.

“The SBP is consistently buying from the market, and inflows are good as Ramazan is a good season for remittances,” said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.

The improvement in the external current account balance has helped maintain foreign exchange buffers despite weak financial inflows. Pakistan posted a current account surplus of $128 million in February, compared with a deficit of $303 million a month before. The current account deficit reduced to $1 billion in July-February FY24 from $3.8 billion a year earlier.

The SBP is targeting minimum forex reserves of $9.1 billion by the end of this fiscal year. According to the SBP, Pakistan has paid $13.5 billion of the total $24.3 billion external debt, including interest. Around $10.8 billion remains, of which $2 billion is expected to be rolled over in the next few weeks, and another $4.0 billion is in talks. Therefore, about $4.8 billion repayment including $1.3 billion interest still has to be done. The external repayment for FY25 is in the similar range as of FY24 with about $12 billion rollovers.

Last week, the International Monetary Fund reached a staff-level agreement with Pakistan, which, if approved by its board, will release $1.1 billion for the country's economy. The government is gearing up for talks with the IMF that will take place next month regarding the extended fund facility. The discussions are in progress for larger and longer-term IMF programme that prioritises stabilisation over growth. At spring meetings in Washington, specific negotiations for the next bailout will begin, with the goal of reaching a staff-level agreement by June 2024. Besides, Pakistan is also all set to offer $300 million in Panda bonds.