A decrease of more than $300 million in Pakistan’s foreign exchange reserves at the State Bank of Pakistan (SBP) has left the country with less than a month’s worth of imports.
The nation’s six-week winning streak has been broken by this decline as the government tries to snag outside funding to avert a potential default. According to the SBP’s weekly bulletin, as of March 24, foreign exchange reserves were down to $4.2 billion.
In the meantime, commercial banks’ net foreign exchange reserves have increased to $5,571.6 million, surpassing the SBP by $1,327.3 million. As a result, Pakistan’s total liquid foreign exchange reserves have increased to $9,815.9 million.
Pakistan’s $350 billion economy still faces financial challenges as the government works to reach a staff-level agreement with the International Monetary Fund (IMF).
The $1.1 billion loan tranche that has been suspended since November 2020 as part of the $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019 has been the subject of discussions between the IMF and the Pakistani government since January.
For Pakistan to open up other external financing options and prevent a potential default on its obligations, IMF funding is essential.
Several friendly nations, including Saudi Arabia, China, and the UAE, have pledged to provide Pakistan with financing in order to support the country’s balance of payments.
Julie Kozack, director of strategic communications at the IMF, stated that timely financial support from outside parties is crucial to bolster the government’s efforts in policymaking and guarantee the successful conclusion of the review with Pakistan.
According to a statement released by the Ministry of Finance, UAE’s ambassador to Pakistan, Hamad Obaid Ibrahim Salim Al-Zaabi, recently met with the finance minister in Islamabad.
An IMF statement revealed that significant progress had been made in the discussions towards policies in recent days, and financial assurances were standard in IMF programs.
The statement went on to say that all IMF programme reviews require resolute and reliable assurances that there is sufficient financing to guarantee the borrowing member’s balance of payments is fully financed in the coming year, with promising financing prospects for the remainder of the programme.
