SBP forex reserves rise by $56m to $7.7bn

Our Correspondent
Friday, Sep 22, 2023

KARACHI: Pakistan’s foreign exchange reserves held by the central bank increased by $56 million to $7.695 billion in the week ending September 15, the State Bank of Pakistan (SBP) said on Thursday.

Total reserves of the country increased by $108 million to $13.186 billion. The reserves of commercial banks increased by $51 million to $5.491 billion.

The SBP’s forex reserves are enough to cover 1.66 months of import payments. “The reserves are steady but we are yet to witness any sizeable dollar flows. It is expected that some flows will come from multilateral sources during October,” said Fahad Rauf, the head of research at Ismail Iqbal Securities.

“However, IMF review would be critical in attracting more flows. Commercial flows are difficult under current circumstances,” Rauf added. In August, Pakistan’s current account deficit was $160 million, down 79 percent from the same month last year.

In August, the current account deficit decreased by 79 percent month-on-month. In July, the

nation experienced a $775 million deficit.

The first two months of the current fiscal year saw a 54 percent reduction in the current account deficit, to $935 million. The deficit for the same time in the previous fiscal year was $2.035 billion.

Primarily, the shrinking deficit can be attributed to a reduction in imports. “If we anticipate a similar trade deficit level, along with the expected recovery in remittances and a higher realisation of export proceeds, the country’s current account may return to a positive balance in the coming months,” said Insight Securities in a note.

“However, it's worth noting that the recent upswing in international crude oil prices poses a potential risk to imports, given that petroleum sector currently accounts for approximately 25 percent of the total import bill,” it added.

“Sustaining a current account surplus is crucial for the economy, especially considering that the country’s reserves currently provide less than two months’ worth of import cover. Enhancing the flow of remittances through effective administrative measures is a low hanging fruit that authorities should seize.”

During an analyst briefing on September 14 after the announcement of the monetary policy, the central bank governor Jameel Ahmed said that in FY2024, Pakistan is scheduled to repay a total of $24.6 billion, which includes $3.4 billion in interest payments and slightly over $21 billion in principal repayments.

So far this fiscal year, an amount of $2.8 billion has been successfully returned, consisting of $2.2 billion in principal and the remaining $0.6 billion in interest. This leaves an outstanding balance of $19 billion yet to be settled.

Approximately $11 billion of this amount is anticipated to be rolled over, with $8 billion already confirmed for rollover and the remaining $3 billion in rollover commitments in the pipeline. Consequently, the net repayable amount stands at $8 billion.