Pakistan’s forex reserves fall to $3.54bn as debt payments loom

By Staff Reporter

ISLAMABAD: Pakistan’s central bank saw its foreign exchange reserves drop by $482 million to $3.54 billion in the week to June 16, latest data showed on Thursday, as the country faces pressure to revive a stalled IMF programme and repay its debts.

The State Bank of Pakistan (SBP) said the decline was due to external debt repayments and that it had received $300 million from a commercial loan this week, which would be reflected in the next data release.

The total liquid foreign reserves held by the country stood at $8.86 billion, including $5.33 billion held by commercial banks.

Pakistan’s forex reserves are at a critical level, barely enough to cover a month of imports, and analysts say the country needs to secure more external financing to avoid a balance of payments crisis.

“The reserves decrease is due to temporary difference arising out of the time lag between debt payment and its reimbursement,” said Fahad Rauf, head of research at Ismail Iqbal Securities. “However, there are $900 million payments due in June, which won’t be rolled over, thus, reserves at the end of the year are expected to be lower than current levels.”

Over the weekend, Finance Minister Ishaq Dar said China had agreed to roll over $2.3 billion in loans and deposits that were due this month, easing some of the pressure on Pakistan’s reserves.

This included a $1 billion deposit from China’s State Administration of Foreign Exchange (SAFE) and a $1.3 billion loan from China Development Bank (CDB), both of which were repaid and refinanced within a week, according to Dar.

Dar also said another $300 million loan from Bank of China was repaid on Friday and hoped it would be rolled over within three to five days.

He said he aimed to keep the SBP’s reserves at $4 billion by the end of June. Pakistan’s economic woes have been compounded by the suspension of a $6.7 billion IMF programme that was agreed in 2019 but has been on hold since November 2022 due differences on debt financing requirements.