SBP’s forex reserves drop by $233m amid debt repayments

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KARACHI: The foreign exchange reserves held by the central bank dropped by $217 million to $7.180 billion in the week ending November 17, the State Bank of Pakistan reported on Thursday, amid looming debt repayments.
The country’s total reserves fell by $233 million to $12.302 billion. The reserves of commercial banks also decreased by $17 million to $5.122 billion.
The SBP attributed the drop in reserves to debt repayment in its weekly statement. Pakistan faces a challenging external financing situation, as it has to repay about $5 billion in external debt in the remaining months of the current fiscal year.
However, the expected financing from the International Monetary Fund, bilateral, and other multilateral partners should support the nation’s foreign exchange reserves. Pakistan expects to secure a tranche of $700 million from the International Monetary Fund’s existing loan program after completing a first review. The IMF’s executive board is expected to approve the staff-level agreement with Pakistan for the first review of the $3 billion stand-by arrangement early next month.
It is projected that Pakistan will get approximately $1.2 billion in financing from the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank before the end of the year. The government also expects more inflows from Saudi Arabia and the United Arab Emirates to support the country’s economy.
Foreign currency inflows received under the Roshan Digital Account (RDA) exceeded $7 billion as of November 23, the central bank reported on Thursday, supporting Pakistan’s decreasing foreign exchange reserves.
“Roshan Digital Account (RDA) inflow crosses USD 7 Billion mark. Thank you overseas Pakistanis for your unwavering support and trust,” the State Bank of Pakistan said on its social media platform (previously Twitter).
RDA is a source of remittances; additionally, these inflows boost the forex reserves of commercial banks, which is reflected in the country’s total forex reserves. Analysts said that while the RDA inflows are improving somewhat, they are expanding at a slower pace. RDA funds indicated a slight increase when compared with last month, even though the government raised the profit rates on Naya Pakistan Certificates (NPCs).
Despite a 61 percent month-on-month increase in the current account deficit in October, primarily as a result of a higher trade gap brought on by an increase in imports, analysts believe that the deficit for this fiscal year will be manageable because anticipated foreign inflows are likely to materialize.
The CAD declined by 66 percent to $1.1 billion in the first four months (July-October) of the current fiscal year. The chance of Pakistan defaulting on its foreign loans is also decreasing thanks to the IMF bailout package. “Pakistan’s country risk premium has fallen significantly from its peak of 14.13 percent on June 27, 2023, to its current level of 3.35 percent. This shows building investor confidence in Pakistan post-IMF Stand-By Agreement (SBA),” said Topline Securities.

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