SBP’s forex reserves drop to $9.10bn

KARACHI: Pakistan’s foreign exchange reserves held by the central bank fell by $6 million to $9.103 billion in the week ending June 7, the State Bank of Pakistan said on Thursday.

However, the country’s total foreign exchange reserves increased by $168 million to $14.384 billion. The reserves of commercial banks also rose by $174 million to $5.281 billion.During the unveiling of the Pakistan Economic Survey 2023-24 on Tuesday, Finance Minister Muhammad Aurangzeb stated that Pakistan’s foreign exchange reserves now amount to over $9 billion, covering two months’ worth of imports. He emphasized that these reserves are of high quality, providing a strong foundation for the upcoming fiscal year.

The SBP’s officials told analysts at a post-policy meeting on Monday that the central bank expects that the foreign exchange reserves will remain above $9 billion by the end of this month, even after repaying $1 billion external repayment during this period,

During the 11 months of this fiscal year, the SBP has repaid $10.7 billion, while another $1 billion will be repaid this month. This takes total repayments to $11.7 billion for FY24. This is in addition to the rollovers of $11-12 billion in FY24, suggesting a gross requirement of $22.7-23.7 billion.Separately, in July 2024, external repayments were close to $2 billion, while, in the SBP liquidity data sheet, repayments for June and July were $10.2 billion. SBP clarified that the rest of the amount will be rolled over.

The SBP, in its monetary policy statement, emphasized the importance of promptly mobilising financial inflows to meet the country’s needs for external financing and to boost its foreign exchange reserves, which enable it to withstand external shocks and promote sustainable economic growth.

“Going forward, the committee stressed that timely mobilization of financial inflows is essential to meet the external financing requirements and further strengthen FX buffers for the country to effectively respond to any external shocks and support sustainable economic growth,” the SBP said in the statement.

The current account posted a surplus for the third consecutive month in April on the back of robust growth in remittances and exports, which more than offset the uptick in imports. During July-April FY24, the current account deficit narrowed significantly to $202 million.

Workers’ remittances also remained robust in recent months, reaching an all-time high of $3.2 billion in May 2024. The resultant lower current account deficit, along with improved foreign direct investment and the disbursement of International Monetary Fund’s tranche in April, has facilitated ongoing large debt repayments and supported the SBP’s forex reserves.