SBP forex reserves fall below $11bn on debt payments

KARACHI: Pakistan’s central bank’s foreign exchange reserves dropped by $540 million to $10.607 billion during the week ending March 21 due to external debt repayments, the State Bank of Pakistan (SBP) said on Thursday.

The total liquid foreign reserves held by the country also decreased by $465 million to $15.551 billion. However, the reserves of commercial banks rose by $75 million to $4.944 billion.

The SBP’s reserves stabilised at $11 billion, attributed to the improvement in the current account balance bolstered by remittances and dollar purchases from currency markets. However, despite continued dollar buying, the latest decline in reserves shows outflows like external debt repayments. The SBP purchased $5.523 billion from the interbank market between June and December 2024 to bolster its reserves and meet debt obligations.

During a briefing following the rate cut decision on March 10, SBP Governor Jameel Ahmad informed analysts that repayments for the remaining period of the fiscal year 2025 are expected to total around $3 billion, net of rolled-over and refinanced amounts. He also said planned inflows are anticipated to materialise in the fourth quarter of FY25, with some contingent on a successful review by the International Monetary Fund (IMF).

On Wednesday, Pakistan secured a staff-level agreement (SLA) with the IMF for the first review of the ongoing $7 billion loan programme, and also agreed on a new $1.3 billion arrangement under the Resilience and Sustainability Facility (RSF).

Once the IMF board approves the first review of the Extended Fund Facility (EFF), Pakistan is set to receive $1 billion from the IMF. This approval will also lead to inflows from other multilateral and bilateral lenders. After this disbursement, the total funds received under the EFF facility will reach $2 billion. The board’s approval is expected in May.

Additionally, the existing EFF will be supplemented with the RSF, amounting to a total of $1.3 billion, pending board approval.