SBP’s forex reserves rise to $4.46 billion

The State Bank of Pakistan said on Thursday that Pakistan’s central bank’s foreign exchange reserves climbed by $393 million to $4.462 billion in the week ending June 30.

According to the source, the central bank’s total reserves increased by $405 million to $9.745 billion, while commercial banks’ reserves increased by $12 million to $5.282 billion.

The SBP ascribed the increase in foreign exchange reserves to official inflows.

The government paid China $1.3 billion in external debt last month, but under the terms of the agreement, Beijing refinanced it with Islamabad in order to boost its diminishing foreign exchange reserves and avoid default.

The $1.3 billion in Chinese commercial loans were due in June. Pakistan paid $300 million in debt to the Bank of China and $1 billion to the China Development Bank, according to the schedule.

China has refinanced $1.3 billion in maturing commercial loans that Pakistan had requested be refinanced as soon as possible. Last month, $1.3 billion of the entire amount was received.

The IMF agreement is likely to increase the reserves.

At an event on Tuesday, SBP Governor Jameel Ahmad stated that the IMF bailout will assist shore up the country’s foreign exchange reserves.

He stated that Pakistan had paid all of its foreign debtors on time and anticipated improved flows, which would be beneficial.

The cost of insuring Pakistan’s sovereign debt against default has decreased dramatically as foreign investors have grown increasingly confident that Pakistan’s default risk has been eliminated, at least until it becomes an International Monetary Fund (IMF) programme.

After a lengthy review process that began in November of last year, Pakistan reached a staff-level agreement with the IMF this week to release $3 billion in essential bailout money.

On Friday, the Extended Financing Facility programme, which was agreed in 2019, came to an end. As a result, the agreement is a stand-by arrangement (SBA).

According to an IMF press release, the Executive Board will convene on July 12, 2023, to consider specifics of a nine-month SBA.

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