KARACHI: The central bank's foreign exchange reserves rose by $394 million to $4.432 billion in the week ending April 14, largely du
KARACHI: The central bank’s foreign exchange reserves rose by $394 million to $4.432 billion in the week ending April 14, largely due to assistance from China, State Bank of Pakistan (SBP) data showed on Thursday.
Total reserves of the country increased by $400 million to $9.965 billion. The reserves of commercial banks rose by $6 million to $5.532 billion. The SBP ascribed an increase in reserves to the receipt of a $300 million commercial loan.
“The reserves have increased over the past few weeks, mainly due to support from China,” said Fahad Rauf, head of research at Ismail Iqbal Securities. “The current account has also been brought in positive territory through administrative measures,” he added.
However, the SBP’s reserves, nevertheless, are barely sufficient to cover imports for a month, according to Rauf. He said Pakistan needs a lot more funds to be able to let the economy function properly. There is no other way than to get back to the International Monetary Fund.
Improvement in the balance of payments is expected to help elevate some pressure on the forex reserves. Pakistan posted a current account surplus of $654 million in March against a deficit of $36 million in the previous month.
The nation’s current account deficit for the first nine months (July through March) of the current fiscal year was $3.4 billion, which was 74 percent lower than the $13 billion deficit for the same period last year.
Reduced pressure on the external current account has been made possible by a weaker currency, import limitations, and limits on the availability of foreign exchange, as well as fiscal tightening and higher interest rates.
The country waits for the IMF to revive a $6.5 billion bailout package. The IMF wants $6 billion in commitments from friendly countries and multilateral and bilateral lenders to fill the shortfall in external funding.
The United Arab Emirates has committed $1 billion to Pakistan in financial support after Saudi Arabia committed $2 billion. However, the global lender requires further funding assurances to secure a bailout.
Although foreign exchange reserves are improving, they nevertheless mean nothing in the face of significant repayments of foreign debt. Pakistan has to make around $3 billion in external debt repayments by June. Financing assurances of $3 billion are yet to be arranged in order for IMF staff-level agreement to conclude and then the executive board approval, according to analysts.
www.thenews.com.pk