SBP reserves rise to $8.040 billion in fourth consecutive gain

KARACHI The foreign currency reserves held by the central bank increased by $19 million to $8.040 billion in the week ending March 29, marking the fourth successive week of gains, the State Bank of Pakistan said on Thursday.

However, the country’s total forex reserves fell by $49 million to $13.379 billion. The reserves of commercial banks dropped by $67 million to $5.339 billion.The SBP’s reserves are sufficient to cover imports for roughly two months.

Although the SBP's reserves increased for the fourth consecutive week, the central bank did not mention a reason for the ongoing increase in its foreign reserves.Analysts said that the increase in remittances during the holy month of Ramazan and the central bank's continual purchase of dollars from the market are the reasons behind the improvement in the foreign exchange reserves.

After a four-year gap, international investors' interest in government securities has increased, indicating the return of hot money.

Pakistan’s assets are trending upward following a staff level agreement with the International Monetary Fund last month to provide more financial aid for the country.

Analysts predicted that if Pakistan secures the new long-term IMF deal, there's a good probability that more foreign portfolio investments will arrive to purchase high-yielding government papers, supporting Pakistan's currency and foreign exchange reserves in the near run.

However, the reserves are likely to be under pressure because of the impending payments on external debt.Pakistan is all set to fulfill its commitment to repay $1 billion on its 10-year dollar bond, set to mature in mid-April, said Mohammed Sohail, the CEO at Topline Securities Limited.

“This Pak 2024 Bond has rallied by more than 160 percent (excluding coupon) in the last 18 months,” he said.Earlier concerns loomed as FX reserves fell below $3 billion in February 2023 which raised fears of a potential default on bond payments.

However, Pakistan not only successfully repaid its $1 billion on the 2023 bond but also bolstered its FX reserves, currently standing at $8 billion (plus $5 billion in bank deposits), Sohail said.

“Following this $1 billion repayment of the 2024 Bond, Pakistan's FX reserves will experience a decline. However, the anticipated IMF tranche of $1.1 billion, likely to be received by the end of April, is expected to restore reserves to the $8 billion mark.”