KARACHI: The foreign exchange reserves held by the central bank increased by $25 million to $8.006 billion in the week ending April 26, the State Bank of Pakistan (SBP) said on Thursday.
The country’s foreign reserves rose by $36 million to $13.316 billion. The reserves of commercial banks also increased by $11 million to $5.310 billion. After receiving $1.1 billion this week from the International Monetary Fund as the last installment of a $3 billion loan programme, the SBP’s reserves have increased to $9 billion. The sum will be reflected in the SBP’s reserves for the week ending on May 3, the central bank said in a statement issued earlier this week.
The IMF’s executive board approved the immediate disbursement of funding after completing the second and final review of the nine-month stand-by arrangement during its meeting on Monday.
The central bank’s governor, Jameel Ahmad, informed analysts after the monetary policy meeting on Monday that the forex reserves are currently in a comfortable position. The SBP has paid off its commercial loans and now its debt profile consists of bilateral and multilateral loans, which has resulted in an improvement in the maturity profile of the debt, Ahmad said.
Despite weak financial inflows, the reduction in the current account deficit has enabled the central bank to make significant debt repayments, including the repayment of a $1 billion Eurobond.
Analysts believe the central bank is maintaining its reserves by purchasing dollars from the market. The SBP is optimistic that it can maintain the $9 billion reserve level by June 2024, despite upcoming external payments of $1.8 billion. During the fiscal year 2024, the external debt that needed to be serviced was $24.3 billion. Out of this amount, $3.9 billion was allocated for interest payments, while the remaining $20.4 billion was for principal repayments. The majority of this debt has already been settled, and only $1.8 billion in principal remains to be paid in the remaining months of FY24, according to the SBP.
A mission from the IMF is expected to arrive in Islamabad in mid-May to initiate talks for a new bailout. Muhammad Aurangzeb, Pakistan’s Finance Minister, stated the country might have a staff-level agreement on the new programme by the start of July. The Fund and the government are already in talks for the new funding.
The country’s economy is struggling with a precarious balance of payments because it needs to repay nearly $24 billion in debt and interest over the next fiscal year—a sum that is significantly greater than the foreign currency reserves held by the central bank.
