SBP’s foreign exchange reserves fall to $7.7 billion

KARACHI: The central bank’s foreign exchange reserves fell by $118 million to 1.4% in the week ended August 26, it said Thursday.

Reserves held by the State Bank of Pakistan stood at $7.7 billion, enough to cover just over a month of imports.

Pakistan’s total foreign exchange reserves fell 0.9 percent to $13.4 billion, while commercial bank reserves edged down 0.1 percent to $5.7 billion.

Foreign exchange reserves are expected to increase after the country receives the loan disbursement from the International Monetary Fund as part of its bailout.

“SBP received proceeds of USD 1.16 billion (equivalent to SDR 894 million) from the IMF under the Extended Financing Facility (EFF) on August 31, 2022, which would be included in the foreign reserve position of SBP for the week ending September 02, 2022,” the SBP said in a statement.

The new disbursement comes after the Washington-based lender relaunched a bailout for the cash-strapped country.

IMF inflows will also help stabilize the local currency.

The IMF board approved the loan program on Monday, saving Pakistan from a possible default on its foreign debt.

The IMF Executive Board approved an extension of the EFF to June 2023 instead of September 2022 to support program implementation and meet the higher financing needs of this fiscal year as well as unlock additional financing . The board also approved the increase in access by 720 million SDR ($1). billion) bringing total access to $6.5 billion.

By FY2023, foreign exchange reserves, which the SBP sees in its latest monetary policy statement, will likely reach $16 billion.

The additional funding that Pakistan will have access to in this fiscal year will drive this. It would also depend on Pakistan complying with the important measures agreed by the IMF and continuing with its program.

For FY23, Pakistan’s gross financial requirements – which take into account the current account deficit and debt repayments – would be around $30 billion, while available funding in this regard is estimated at $37 billion. of dollars.

The country’s current account deficit narrowed by 45 percent to $1.2 billion in July from $2.2 billion the previous month due to lower imports.