ISLAMABAD: Pakistan’s foreign exchange reserves have received a much-needed boost of over $300 million after the government received a commercial loan, according to a statement from the State Bank of Pakistan (SBP) on Thursday.
The increased reserves bring the SBP’s total foreign exchange reserves to $4.43 billion as of April 14, providing an import cover of less than a month, which has remained at a critical level for several months.
Net foreign reserves held by commercial banks stood at $5.53 billion, $1.1 billion more than the central bank, taking the total liquid foreign reserves to $9.96 billion.
The increase in SBP reserves was mainly due to the receipt of a $300 million commercial loan from the Industrial and Commercial Bank of China Ltd (ICBC), the last of three disbursements.
Pakistan has received a total of $2 billion from Chinese institutions, including $1.3 billion from ICBC and $700 million from the China Development Bank. In addition, China has also rolled over a $2 billion loan.
The critical level of foreign exchange reserves highlights the urgent need to revive the stalled program with the International Monetary Fund (IMF).
Pakistan and IMF talks for bailout package
While Pakistan is currently engaged in talks with IMF over its revival, the IMF has emphasized the importance of obtaining the necessary financing assurances as soon as possible to pave the way for the successful completion of the ninth Extended Fund Facility (EFF) review.
A delay in an agreement with the IMF is taking a toll on the economy, particularly the rupee.
A shortage of foreign currency reserves has also added pressure to the economy, which heavily relies on imports to run its engines.
While the central bank has put some curbs on inward shipments, reducing the current account deficit in the process, several businesses have been forced to either shut down or limit operations as policymakers scramble to arrange dollar inflow.
In the meantime, the increase in foreign exchange reserves will provide some relief to the government as it seeks to shore up its reserves and maintain stability in the face of economic challenges.
The news of the increased reserves comes as Pakistan’s Prime Minister, Shehbaz Sharif, announced that the country had fulfilled all conditions laid down by the IMF for disbursement of the next tranche of loan.
