SBP’s FX reserves fall to $7.95 billion

KARACHI – The central bank’s foreign exchange reserves fell by $956 million, or 10.7 percent, in the week ended November 4 on external debt payments, it said Thursday.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) totaled $7.95 billion. The reserves cover imports for almost five weeks. Pakistan’s total foreign exchange reserves fell $958 million, or 6.5 percent, to $13.72 billion. Reserves held by commercial banks fell $2 million to $5.76 billion.

The SBP attributed a decline in reserves to external debt servicing. “Major foreign debt repayments completed during the week include the repayment of GoP [Government of Pakistan] commercial loans. Refinancing of these loans is underway, which will improve foreign exchange reserves in the coming weeks,” the statement said.

Pakistan is facing a balance of payments crisis and the foreign exchange reserve position is deteriorating by the day. Reserves remained under pressure despite receiving $1.5 billion from the Asian Development Bank (ADB) last month. “The government has said that the decline in reserves is due to commercial loan repayments and says they would refinance these loans, which would improve reserves in the future,” said Samiullah Tariq, research director at Pak-Kuwait Investment Company .

“It should be noted that the decline in reserves is not due to the current account deficit and loan repayments, which would be offset by additional borrowing,” he added.

Pakistan is expected to receive inflows from bilateral and multilateral lenders, which will not only help the country meet its debt obligations but also improve foreign exchange reserves.

China and Saudi Arabia have asked Pakistan to provide a €13 billion financial package

Saudi Arabia’s Crown Prince Mohammed bin Salman is due to visit Pakistan this month, while Islamabad is hoping to receive a $4.2 billion bailout from Riyadh.

Pakistan will receive $500 million in co-financing for the BRACE development program from the Asian Infrastructure Investment Bank (AIIB), the country’s Finance Minister Ishaq Dar said on Wednesday.

“These funds will be received by the State Bank of Pakistan in November 2022,” Dar said in a tweet. The SBP tightened controls to stem foreign currency outflows, which would help ease pressure on foreign exchange reserves.

SBP on Tuesday lowered foreign currency cash-taking limits for travel and introduced a $30,000 per person annual limit for card-based cross-border transactions. Under the revised limits, persons aged 18 and over (adults) can now withdraw the equivalent of US$5,000 in foreign currency (FCY) per visit from Pakistan. Previously, a person traveling abroad was allowed to carry a total of $10,000 worth of foreign cash.

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