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SBP forex reserves rise to $9.157 billion amid overall decline

Our Correspondent
Friday, May 24, 2024

KARACHI: The central bank forex reserves rose to $9.157 billion as of May 17, a $22 million increase, despite a $41 million drop in total reserves to $14.585 billion, data showed on Thursday.

The country’s total forex reserves fell by $41 million to $14.585 billion, the State Bank of Pakistan said. The reserves of commercial banks decreased by $63 million to $5.428 billion. The SBP’s reserves are adequate to cover two months of import payments.

The SBP’s reserves have increased from $4 billion at the end of June 2023 to $9.1 billion after the successful completion of the International Monetary Fund’s $3 billion stand-by arrangement. The loan programme concluded last month.

The current account deficit of the nation is progressively getting better, reflecting the reduced trade deficit and the increase in remittances. This also supported the foreign exchange reserves. The SBP was able to make its external payments on time while building reserves because of improvement in the current account deficit and financial inflows, especially from the IMF.

Pakistan posted a current account surplus of $491 million in April, the highest level since March 2023, up 13 percent from the previous month.The country's current account deficit for the 10 months (July-April) of this fiscal year was nominal at $202 million, a 95 percent decrease from $3.920 billion in the same period last year.

The SBP, in its latest report, said on external account that slightly improved global outlook and domestic growth prospects are anticipated to boost foreign exchange earnings from exports and remittances.

“While resilient global demand may have a positive impact on Pakistan’s exports, moderating global commodity prices may significantly suppress import prices, leading to an overall contraction in import bill and, hence improvement in trade balance,” the SBP said.

“This outlook remains susceptible to unfavorable movement in international commodity prices and continued tight global financial conditions.” “Under these circumstances, it is imperative to boost exports through reforms aimed at enhancing productivity and attracting FDI in export-oriented sectors to keep the current account at a sustainable level without constraining domestic economic activities.”

The IMF and Pakistani officials concluded their discussions on Thursday regarding a new loan programme.“The IMF has informed authorities that the next bailout package under the Extended Fund Facility (EFF) will only be considered if the upcoming budget is aligned with IMF guidelines and approved by parliament,” said Chase Securities in a note.

“This could lead to formal negotiations and a staff-level agreement, potentially supplemented by $6 to $8 billion in climate finance, likely in July 2024,” it said.The Prime Minister Shehbaz Sharif is also visiting the UAE to discuss matters related to investment and regional cooperation. The IMF package may also require assurances of deposit rollovers from key Gulf countries and China.