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May 7, 2021

Forex reserves fall 3.3pc to $22.7bln on debt repayment

May 7, 2021

KARACHI: Pakistan’s foreign exchange reserves sharply dropped $778 million or 3.30 percent as of April 30 on the back of foreign loan repayments, the central bank said on Thursday.

The total liquid foreign reserves held by the country fell to $22.742 billion from $23.52 billion a week ago, according to the State Bank of Pakistan (SBP).

During the week ended 30-April-2021, SBP reserves decreased $830 million to $15.597 billion.

“During the week GOP [Government of Pakistan] commercial loan of $1 billion was paid, whose impact on SBP’s reserves was partially offset by official inflows.”

The reserves held by commercial banks, however, rose to $7.144 billion from $7.092 billion.

The government’s increasing foreign debt obligation put pressure on the country’s forex reserves.

Pakistan will have to pay $3.8 billion to external creditors in the last quarter of the current fiscal year.

The reserves may face a further decline, if there is any gap in the projected disbursements.

The country’s external debt servicing is expected to be above $10 billion in the next fiscal year.

The country’s forex reserves had been rising and jumped to a five-year high of $23 billion in the previous weeks boosted by inflows from Eurobonds, workers’ remittances and financial assistance coming from multilateral institutions.

Fund inflows through Roshan digital account also contributed to the rise in the forex reserves. RDA inflows reached

more than $1 billion since its launch in September.

RDA, launched in September last year, provides innovative banking solutions to millions of non-resident Pakistanis and resident Pakistanis with declared offshore assets, who need a secure and convenient facility, to undertake banking-payments, fund-transfers and investment activities in Pakistan from abroad.

The rollover of loans by the United Arab Emirates and retaining of the remaining $1 billion deposit from Saudi Arabia also helped the forex reserves stabilise. Pakistan received proceeds of $2.5 billion against issuance of Eurobonds.

Eurobonds have been oversubscribed almost two times after receiving raving response to attractive interest rates from foreign investors.

In March, Pakistan received a third tranche of nearly $500 million from the International Monetary Fund's loan program. With the receipt of the latest tranche, Pakistan has received a total of around $2 billion so far. The World Bank and ADB also committed funds.

Current account is in a stable position with surplus of $959 million in the July-March period.