ISLAMABAD: Pakistan’s State Bank of Pakistan (SBP) reported a $170 million decline in its foreign exchange reserves for the week ending April 7, 2023. This decrease was attributed to external debt repayments, according to the central bank’s released data on Thursday.
SBP reserves now stand at $4.03 billion, which is insufficient to cover even a month’s worth of imports.
Meanwhile, commercial banks in the country have forex reserves of $5.5 billion, while the total forex reserves of the country amount to $9.6 billion.
This decrease in forex reserves is a cause of concern for the country, given its $350 billion economy that continues to suffer due to financial troubles.
The IMF’s $1.1 billion loan tranche has been on hold since November 2022 as Pakistan continues to delay its agreement with the international lender.
The delay in securing the IMF loan has put Pakistan at risk of default.
IMF loan and Pakistan’s debt repayments
However, the country is getting closer to securing the IMF loan, as Saudi Arabia has already committed $2 billion in funds, and sources suggest that the UAE is likely to provide $1 billion to Pakistan by the end of this week.
The IMF Director of the Middle East and Central Asia Department, Jihad Azour, has expressed confidence that an agreement will be reached soon.
Once the loan is secured, it will unlock other bilateral and multilateral financing avenues for the country to shore up its foreign exchange reserves.
However, the situation remains grim for Pakistan as the IMF has cut the country’s growth forecast to 0.5% from the earlier estimate of 2%.
The nation is facing a dollar shortage, leading to supply chain disruptions and companies halting production, resulting in lowered growth rate projections by the World Bank (WB) and the Asian Development Bank (ADB) to 0.4% and 0.6%, respectively.
Pakistan’s dwindling foreign exchange reserves and delayed IMF agreement continue to hamper the country’s economic growth, putting it at risk of default.
However, with commitments from Saudi Arabia and the likely assurance of funds from the UAE, Pakistan may soon secure the much-needed IMF loan and unlock other financing avenues to shore up its reserves.
