By Staff Reporter
KARACHI: The foreign exchange reserves climbed to the highest level in four months, bolstered by official inflows from lenders and allies, easing pressure on the country’s balance of payments.
The reserves held by the State Bank of Pakistan rose by $852 million to $7.757 billion in the week ended Dec. 22, according to data released by the central bank on Thursday. The reserves of commercial banks dropped by $65 million to $5.099 billion, bringing the total reserves to $12.856 billion.
The central bank didn’t specify the sources of the inflows, but said they were official government receipts.
Analysts said the increase was mainly due to loans from the World Bank and the Asian Development Bank, as well as bilateral assistance from China and Saudi Arabia.
The boost in reserves will help Pakistan improve its liquidity and debt repayment capacity, as well as cover about two months of imports, said Samiullah Tariq, the head of research at Pak-Kuwait Investment Company.
“It’s a good omen for Pakistan,” he said. “The reserves will also support the rupee, which has appreciated against the dollar in recent months.”
Pakistan’s currency has gained about 9 percent against the greenback since July, when the country secured a $3 billion bailout package from the International Monetary Fund. The IMF’s lending program has also enabled Pakistan to access funding from other multilateral institutions and friendly countries.
The IMF’s stand-by arrangement also imposed strict conditions on Pakistan, such as reforming the exchange companies’ sector and cracking down on illegal currency dealings. These measures have helped narrow the gap between the interbank and open-market rates, and encouraged more remittances through official channels.
The current account deficit, which has been a major source of concern for the past seven years, has also shrunk significantly due to lower imports. Analysts expect the deficit to remain manageable in the coming months.
“We expect the current account deficit to be limited in the range of $2.5-4 billion, as exports are rising due to reforms and imports are weak due to demand destruction following significant inflation burden in the last two years,” Alfalah Securities said in a report.
Pakistan’s external financing needs are estimated at $28.7 billion for the current fiscal year, including $24.6 billion for debt repayments and $4 billion for the current account deficit. The country has already repaid $5.48 billion and rolled over $9.3 billion of its debt.
The remaining funding gap of $14 billion is expected to be met by foreign investments, IMF disbursements, and loans from other creditors.
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