Pak foreign exchange
reserves down by $132m
fell to 99m dollars,
IMF revives bailout

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KARACHI: The country’s total liquid foreign exchange reserves dropped by $132 million during the last week. According to State Bank of Pakistan’s (SBP) weekly foreign exchange reserves report issued on Thursday, total liquid foreign exchange reserves held by the country stood at $15.611 billion as of July 7, 2022 compared to $15.742 billion as of June 30, 2022.

During the week under review, SBP’s reserves decreased by $99 million due to external debt payments. SBP’s foreign exchange reserves declined to $9.717 billion by the end of the last week down from $9.816 billion. Net foreign reserves held by commercial banks also slide by $33 million to $5.893 billion.

It may be mentioned here that federal government is making efforts to boost the sliding foreign exchange reserves of the country. Recently, Pakistan received some $2.5 billion inflows from China, while on Thursday IMF and Pakistan reached a staff level agreement on policies to complete the combined 7th and 8th reviews of Pakistan’s Extended Fund Facility (EFF). Subject to Board approval, this agreement will release $1,177 million (SDR 894 million) to Pakistan, bringing the total disbursements under the program to about $4.2 billion.

Meanwhile, the International Monetary Fund (IMF) has agreed to revive a bailout package for Pakistan, providing timely relief as the high global price of energy imports pushes the cash-strapped country to the brink of a payment crisis.
An IMF statement late Wednesday said its staff and Pakistani authorities had reached an agreement on policies under review of the global lender’s Extended Fund Facility (EFF) Program for Islamabad. The staff-level agreement, if approved by the IMF board, will bring total disbursements under the program to about $4.2 billion.
Finance Minister Miftah Ismail said in a tweet that Pakistan “will soon receive” an initial tranche of $1.17 billion.
“Pakistan is at a challenging economic juncture. A difficult external environment combined with procyclical domestic policies fueled domestic demand to unsustainable levels,” said Nathan Porter, who led the IMF team in weeks of negotiations with Islamabad.
“The resultant economic overheating led to large fiscal and external deficits in FY22, contributed to rising inflation, and eroded reserve buffers,” Porter added.

The IMF statement noted that its board would also consider an extension of the EFF program until the end of June 2023, and whether to add nearly $1 billion.

Central bank foreign currency reserves have fallen around $9.7 billion, barely enough to cover a few weeks of imports. The rupee also dipped to historic lows against the U.S. dollar in recent weeks.
“The Agreement with the Fund has set the stage to bring country out of economic difficulties,” Prime Minister Shehbaz Sharif said in a tweet.
The resumption of the IMF loan means Pakistan will have easier access to funds from other international lenders, including the World Bank and the Asian Development Bank. Pakistan needs at least $41 billion in the next 12 months to repay debt and fund imports, according to a Bloomberg news agency report. In Pakistan, inflation is growing at the second-highest rate in Asia.
Analysts saw the deal as crucial for Sharif’s coalition government, which came to power in April and is struggling to stabilize the economy at a time when Russia’s invasion of Ukraine has led to an increase in fuel prices.