KARACHI: Pakistan’s foreign exchange reserves held by the central bank slightly dropped by $110 million to stand at $8.04 billion in
KARACHI: Pakistan’s foreign exchange reserves held by the central bank slightly dropped by $110 million to stand at $8.04 billion in the week ending August 4, the State Bank of Pakistan (SBP) said on Thursday.
Total reserves of the country decreased by $125 million to $13.33 billion. The reserves of commercial banks also fell by $14 million to stand at $5.29 billion during the week under review.
The SBP attributed a decline in the forex reserves to external debt repayments. Easing of import restrictions, according to Sana Tawfik, an analyst and economist with Arif Habib Limited, is causing a decrease in foreign exchange reserves. The International Monetary Fund (IMF) and Pakistan reached a staff-level agreement, which enabled Pakistan to benefit from bilateral inflows.
Last month, the IMF approved a fresh $3 billion bailout for Pakistan. The IMF and friendly nations provided the country with $4.2 billion in financial support in July. The country received inflows of $2.0 billion from the Kingdom of Saudi Arabia, $1.2 billion from the IMF, and $1 billion from the United Arab Emirates.
“The forecast for the foreign exchange reserves will depend on when projected inflows of foreign currency actually materialise,” Tawfik said. “In order to complete the reviews of the IMF loan programme on time, the caretaker government must perform the actions outlined in the staff-level agreement.” The nation will be able to obtain the remaining $1.8 billion from the IMF if these reviews are successful. If the IMF disbursements and other finance from the multilateral sources arrive on time, the reserves will increase, she added.
Fahad Rauf, head of research at Ismail Iqbal Securities, said “I think the reserves situation should be maintained around current levels as IMF-SBA would allow external inflows from multilateral and bilateral sources to continue. Moreover, SBP also expects some commercial borrowings.”
Pakistan expects to roll over almost half of its maturing debt in fiscal year 2024, according to Jameel Ahmad, governor of the central bank.
For this fiscal year, the nation will repay slightly less than $24.5 billion in foreign debt. In an analyst briefing on the occasion of the monetary policy announcement on July 31, Ahmad stated that this includes principal repayment of about $21 billion and interest payments of $3.3 billion.
Out of the $21 billion principal repayments, the SBP expects a rollover of around $11.3 billion. Pakistan has successfully managed to have an agreement for the rollover of $5.3 billion, while another $6 billion is expected to be rolled over. Out of the remaining $10 billion, the $1.5 billion principal amount has been repaid in July, and $8.5 billion would be repaid further.
The SBP expects inflows to be close to double than $8.5 billion in FY2024. There are multilateral and commercial inflows expected during this quarter (July-September).
The forex reserves are expected to cross $10 billion by the end of this fiscal year, according to the SBP. The country’s imports are expected to stay lower, which will help limit the current account deficit this fiscal, the SBP said in its latest monetary policy statement.
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