By Staff Reporter
KARACHI: The State Bank of Pakistan’s (SBP) foreign currency reserves have dropped to levels worth just six weeks of imports, latest figures showed on Thursday.
The reserves fell to $9.723 billion, below the closely watched $10 billion level, on May 27. The reserves held by the State Bank of Pakistan dropped by $366 million during the week, the bank said in a statement. The SBP attributed a decline in its reserves to external debt repayments.
The country’s foreign currency reserves decreased by $378 million to $15.771 billion and the reserves of the commercial banks also fell by $13 million to $6.049 billion.
Analysts estimate the SBP’s reserves are barely enough to cover six weeks of imports.
Pakistan has recently been battling to stave off a balance of payments pressures due to dwindling foreign currency reserves and a widening current account deficit. The lack of foreign assistance amid delay in the revival of the IMF programme in the presence of a higher trade deficit and increasing foreign debt payments put a heavy dent on reserves.
The rupee depreciated by 6.4 percent against the dollar in May due to falling reserves and the higher import bill. The uncertainty over the restart of the IMF loan facility affected investor confidence in the local currency.
“The trade deficit has increased, and the IMF programme is pending,” said Fahad Rauf, the head of research at Ismail Iqbal Securities, referring to the decline in the reserves. “Funds from China are expected which would provide some support. But the IMF [deal] needs to happen.”
Pakistan is likely to get $2.3 billion from China, which would help bolster the country’s foreign currency reserves.
“The terms and conditions for refinancing of RMB 15 billion deposit by Chinese banks (about $ 2.3 billion) have been agreed. Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves,” Finance Minister Miftah Ismail said in a Tweet.
The minister expects Pakistan and the IMF to reach a staff-level agreement for the resumption of the $6 billion bailout package after the budget announcement this month.
However, analysts fear that the sixth review on the Extended Fund Facility could take some time to complete as the IMF wants the country to hike fuel prices.
The bailout deal with the IMF would prove beneficial for Pakistan as the long-impending approval from the IMF for the seventh review (worth $900 million) would unlock more inflows from other multilateral donors as well.
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