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SBP reserves hold steady; Eurobond impact awaited

The SBP repaid $1 billion in Eurobonds on Friday

By Our Correspondent
April 16, 2024
State Bank of Pakistan (SBP) building. — AFP/File
State Bank of Pakistan (SBP) building. — AFP/File

KARACHI: The foreign exchange reserves held by the central bank remained stable at $8 billion during the week ending April 5, though these figures do not reflect a recent Eurobond payment of $1 billion, which the State Bank of Pakistan (SBP) successfully made last week.

The SBP managed reserves inched down by $0.1 million to $8.040 billion. However, the country’s forex reserves increased by $62.8 million to $13.441 billion. The reserves of commercial banks rose by $63 million to $5.401 billion.

Due to last week's five-day public holidays for Eidul Fitr, the SBP released forex numbers later than usual. The given forex reserves position shows the SBP’s reserves are stable at $8 billion but with the recent Eurobond payment last week, the reserves may drop to $7 billion.

The SBP repaid $1 billion in Eurobonds on Friday as the country is seeking a new long-term bailout from the International Monetary Fund to help manage its external financing needs and economic recovery.

Pakistan's short-term financial prospects are cautiously optimistic. Concerns remain, nevertheless, over its capacity to pay off its long-term debt. The country has to pay back $4.3 billion in external debt in the last quarter of this fiscal year.

After the repayment of the 2024 bond, Pakistan’s total outstanding international bonds/Sukuks are $6.8 billion (6.8 percent of public external debt) with the next maturity amounting to $500 million in September 2025, according to analysts.

Also, Finance Minister Muhammad Aurangzeb mentioned in his recent media interaction that an effort will be made to explore opportunities in the Chinese bond market.The central bank’s foreign exchange reserves have fallen following the latest bond repayment. However, it seems likely that with the $1.1 billion final IMF tranche, which is expected to be released after the global lender's board meeting later this month, FX reserves will increase to $8 billion. The $3 billion IMF stand-by arrangement ended on Thursday.

According to IMF head Kristalina Georgieva, Pakistan and the IMF are in talks for a possible follow-up programme.To attend the IMF-World Bank spring meeting in Washington, Finance Minister Aurangzeb left on Sunday. It is there that he will formally request Pakistan's 24th long-term IMF bailout package.

Reports state that Pakistan opted to request an augmentation of the IMF's extended fund facility through climate finance, potentially garnering $6 to $8 billion for the upcoming programme.

In recent weeks, there has been discussion between the two sides over the negotiation of a longer-term bailout that includes the required policy measures to control rising debt payments, build up reserves, and rein in deficits.