Tag: forex reserves

SBP-held forex reserves increase by $66 million as Pakistan seeks critical IMF loan tranche

The State Bank of Pakistan (SBP) has reported a minor increase in its foreign exchange reserves, as the nation desperately seeks to unlock a critical tranche of funding from the International Monetary Fund (IMF).

The central bank stated that its reserves had risen by $66 million to $3,258.5 million as of the week ended February 17, providing an import cover of around three weeks. The net foreign reserves held by commercial banks were reported to stand at $5,468.0 million, $2,209.5 million more than the SBP, taking the total liquid foreign reserves to $8,726.5 million.

China development bank approves $700 million facility for Pakistan

Finance Minister Ishaq Dar has announced that the forex reserves are expected to receive a significant boost in the coming week, as the Board of China Development Bank has approved a $700 million facility for Pakistan. The funds could be deposited into the SBP’s account this week.

Pakistan takes austerity measures in a bid to resume IMF programme

In a bid to resume the delayed IMF programme and avoid default, the Pakistani government has taken a series of steps in the past two months. These measures include adding new taxes, increasing energy prices, and loosening its control on the rupee.

Parliament approved a supplementary finance bill that increases sales tax from 17 per cent to 25 per cent on imports ranging from cars and household appliances to chocolates and cosmetics. People will also have to pay more for business-class air travel, wedding halls, mobile phones, and sunglasses. A general sales tax was raised from 17 per cent to 18 per cent.

Prime Minister Shehbaz Sharif also unveiled cost-cutting measures to save $764 million annually, stating that austerity, simplicity, and sacrifice are the need of the hour.

Concerns over Pakistan’s debt and dollar crunch

Fitch Ratings, a global credit ratings agency, has downgraded Pakistan’s $350 billion economy twice in four months, citing dwindling foreign reserves. Bloomberg data shows that Pakistan has coupon repayments of $542.5 million this year.

In all, the country has $8 billion in dollar bonds debt due by 2051, with the next payment of $1 billion due in April of next year. Most of the nation’s external debt of about $100 billion is sourced from concessional multilateral and bilateral sources.

Pakistan also faces a dollar crunch that tests its external stability, and supply disruptions caused by flooding, food shortages, and IMF preconditions for rescue may push inflation above 30 per cent for the first time on record, according to Bloomberg Economics.

February 24, 2023
China’s $700 million loan to boost Pakistan’s foreign exchange reserves

Pakistan’s Finance Minister Ishaq Dar has announced that the Board of China Development Bank has approved a credit facility of $700 million for Pakistan, and all formalities have been completed.

This announcement was made through a tweet, and the loan is expected to be received by the State Bank of Pakistan this week, which will help to boost the country’s forex reserves.

According to Reuters, the credit facility, provided by the state-owned China Development Bank, will increase Pakistan’s forex reserves by about 20 per cent. This comes at a time when the country is in talks with the International Monetary Fund (IMF) to unlock funds from a $6.5 billion bailout. The loan is in addition to other facilities that China has already extended to Pakistan, and a finance ministry official has stated that the money could arrive as early as Thursday.

China Development Bank did not respond to a faxed request for comment. Currently, China is Pakistan’s largest creditor, and its commercial banks hold approximately 30 per cent of the country’s external debt.

February 23, 2023
Pakistan’s current account deficit drops by over 90% amid import restrictions

According to data released by the State Bank of Pakistan (SBP) on Monday, Pakistan’s current account deficit in January 2023 reduced by 90.2 per cent to $0.24 billion, compared to $2.47 billion in the same month last year.

The decrease in deficit is attributed to the persisting import restrictions, which have been implemented due to the balance of payments crisis that has pushed the country towards default.

However, the shrinking current account deficit is a result of critically low forex reserves, which stood at $3.2 billion as of February 10, barely enough to cover three weeks of imports.

To prevent dollar outflows, the government has limited imports of essential food and medicines until the International Monetary Fund (IMF) provides a bailout to the country.

The government’s strategy of import restrictions has affected industries that rely on imported inputs to continue their operations, leading to a suspension of operations or downsizing production levels and causing layoffs.

During January, the country’s imports stood at $3.92 billion, a decrease of 7.3 per cent from the previous month, while exports fell to $2.21 billion, a decrease of 4.29 per cent from December’s $2.31 billion. Workers’ remittances in January 2023 amounted to $1.89 billion, which is a decline of 9.89 per cent compared to December’s $2.1 billion.

During the first seven months of the current fiscal year, the country’s current account deficit stood at $3.8 billion, representing a 67.13 per cent decline from July-Jan FY22.

February 20, 2023
SBP’s foreign exchange reserves dropped to $7.83 billion

Owing to debt payments, the State Bank of Pakistan’s (SBP) foreign exchange reserves fell to $7.83 billion as of August 5 from $8.385 billion in the last week.

It is worth noting that this is the lowest level in over three years, according to figures released by the SBP.

Pakistan’s overall foreign exchange reserves were $27.067 billion as of August 2021 but fell to $13.561 billion as of August 5, 2022.

The most recent figures on the country’s foreign exchange holdings came when the reserves were quickly running out due to a $6 billion IMF programme that was stalled and the country was experiencing a lack of external funding.

Due to debt payments and a lack of external finance, the central bank’s foreign reserves decreased by $555 million or 6.6 per cent every week.

To reach $13.561 billion, Pakistan’s total liquid foreign reserves decreased by $648 million, or 4.6 per cent, and its commercial banks’ holdings fell by $5.730 billion, or 1.6 per cent.

The SBP’s reserves are sufficient to cover imports for just over a month, according to The News. The reverse decline was brought on by paying off foreign debt.

According to the central bank, debt repayments may slow down over the following three weeks of this month.

On the other hand, the Pakistani rupee continued its upward trend against the US dollar for the ninth day, adding Rs3.38 to trade at Rs215.50 in intraday trade on Friday. The KSE-100 index likewise witnessed an increase of 386 points.

August 12, 2022