The State Bank of Pakistan’s (SBP) foreign exchange reserves have exceeded $9 billion following a recent inflow of $1.1 billion from the International Monetary Fund (IMF). The central bank confirmed that the reserves stood at $9.12 billion in the week ending on May 3. This marks a nearly two-year high, last recorded above $9 billion in mid-July 2022. The net foreign reserves held by commercial banks stood at $5.3 billion, bringing the country’s total forex reserves to $14.45 billion.
The SBP reserves increased by $1.114 billion to $9.1203 billion primarily due to the receipt of the $1.1 billion final tranche from the global lender under the loan program. This tranche was the third and final of $3 billion Stand-By Arrangement (SBA) that Pakistan reached with the global lender, last summer, to avert default threat.
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. The SBP has paid off its commercial loans, and its debt profile now consists of bilateral and multilateral loans. This has resulted in an improvement in the maturity profile of the debt, said Jameel Ahmad, the central bank’s governor, while elaborating on the reserves’ position after the monetary policy meeting on May 2.
Finance Minister Muhammad Aurangzeb further announced that a mission from the IMF is expected to arrive in Islamabad in mid-May to initiate talks for a new bailout. He said the country might have a staff-level agreement on the new program by the start of July. The government and the fund are already in talks about 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 significantly greater than the foreign currency reserves held by the central bank. However, with the recent inflows and the government’s efforts to reduce the current account deficit, the SBP’s forex deposits are currently in a comfortable position.
