SBP’s forex reserves hit 4.5-year high of $18.2bln

KARACHI: The central bank’s foreign exchange reserves rose to the highest level of $18.2 billion in four and a half years due to the inflows from Eurobonds, it said.

“SBP [State Bank of Pakistan] has received $1 billion proceeds from the government’s tap offering of its recently issued Eurobond. Accordingly, SBP’s FX reserves, as on 13 July, 2021, have reached $18.2 billion, which is the highest level since January 2017,” the SBP said in a tweet.

The SBP did not provide numbers on the latest position of Pakistan's total forex reserves. However, the data issued on Thursday showed that the country’s reserves surged by $1.117 billion to $ 24.4 billion in the week that ended July 02.

The SBP’s reserves amounted to $17.2 billion, while the foreign currency reserves of commercial banks amounted to $7.1 billion during the previous week.

The government borrowed from the bilateral lenders, global multilateral financial institutions and sold Eurobonds in the international capital markets, which helped the country shore up its reserves, despite facing large foreign debt repayments.

Pakistan this month raised additional debt through a tap issue of its recently issued three-tranche dollar denominated Eurobond that had attracted $2.5 billion in March.

The country issued $300 million for five-year at 5.875 percent, $400 million bonds for 10-year at 7.125 percent and $300 million for 30 years at 8.450 million.

The receipt of a $1 billion loan from China and $400 million from the World Bank also supported reserves.

Continued official and private inflows, flexible exchange rate regime and persistent improvement in the current account have contributed to the rise in the forex reserves. Remittances soared 27 percent to reach an all-time high of $29.4 billion in the last fiscal year of 2020/21. Flows are also coming from Roshan Digital Account as overseas Pakistanis have deposited $1.562 billion in these accounts through end-June 2021. The current account was in a surplus of $153 million in July-May FY2021, against a deficit of $4.328 billion in a previous year. However, a rise in the foreign loans will push up the country's debt level, keeping the debt servicing higher.

Pakistan secured $11.9 billion in gross external loans in July-May FY2021, including $3.7 billion short-term foreign commercial loans, according to the Economic Affairs Division. The country has to resume the suspended loan repayments to G-20 countries from January next year. G-20 countries suspended the repayment of $3.7 billion loan by Pakistan, under the Debt Service Suspension Initiative, till the end of this year (December 2021). The current account deficit is predicted to reach $8 billion or 3 percent of GDP this fiscal year. The expected increase in domestic demand and more imports along with higher international oil prices will put a burden on the reserves.

Analysts said the timely completion of the sixth review of the International Monetary Fund’s $6 billion loan programme could further boost the foreign exchange reserves.