- Increase comes on back of IMF's new SDR allocation
Total reserves held by the State Bank of Pakistan (SBP) hit a record high of $20.15 billion during the week ended August 27, 2021, after the country received funds under the new Special Drawing Rights' (SDR) allocation of the International Monetary Fund (IMF).
In a statement on Thursday, the SBP said that total liquid foreign reserves held by the country have now reached $27.23 billion on Aug 27,2021. This amount includes $7.08 billion of net foreign reserves held by commercial banks.
Foreign reserves held by the SBP increased $2.57 billion week-on-week after accounting for external debt payments.
During the week ended 27-Aug-2021, SBP received proceeds of IMF SDR allocation amounting to $2.75 billion, said the central bank. "After accounting for external debt payments, reserves increased by $2.57 billion to $20.15 billion."
The new SDR allocation came after the IMF board of governors greenlit increasing the institution's lending capacity by $650 billion, the last step in approving an initiative to boost aid to the most vulnerable countries. The program, which had already been approved by the IMF's executive board in mid-July, was implemented on August 23.
The newly issued SDRs have been allocated to member countries in proportion to their IMF quota. Emerging and developing nations are to receive around $275 billion in total.
While helping the country increase the import cover, Pakistan's policymakers are keen to let market forces determine the rupee-dollar parity, maintaining that the historic-high reserves would not be used to give direction to the currency.
The rupee has already hit a 12-month low this week, nearing the 167 level as a widening current account deficit, and disappointing export figures take toll on the currency.
The country recorded a current account deficit of $773 million in July 2021, as compared to the $583 million surplus in July 2020, with the State Bank anticipating a current account deficit of 2-3 percent of the GDP for FY22.