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KARACHI: Despite repayment of dollar one billion external debt, the State Bank of Pakistan (SBP) successfully managed to maintain its foreign exchange reserves above the level of $8 billion by the end of last week.

According to a weekly FX report issued on Thursday, the SBP’s reserves increased by $ 14.4 million to $ 8.055 billion as of April 12, 2024 compared to $8.04 billion as of April 5, 2024.

Pakistan has executed the repayment of foreign debt worth $1 billion (including principal and interest) on April 12, against a 10-year Eurobond, launched in 2014 and matured in April 2024. With this payment it was being estimated that SBP’s reserves will reduce to the $ 7 billion mark, however, SBP has successfully managed to maintain the reserves above the $8 billion level supported by improvement in the external account.

SBP-held foreign exchange reserves see slight decline, stand at $8.04bn

On external account, remittances arrived in March are the highest monthly inflows in 22 months. With an increase of 31 percent, the country received workers’ remittances amounted to $3 billion during March 2024 compared to $2.25 billion in February 2024. In addition, Pakistan’s trade deficit has declined by 30 percent to $13.54 billion in the first eight months of this fiscal year.

The Governor SBP Jameel Ahmed, in a meeting with investors in in Washington DC, also revealed that improvements in the external account have allowed the SBP to more than double its FX reserves from $3.1 billion (January 2023) to around $8 billion on 12, April 2024 despite the repayment of a $1 billion Eurobond on the same day.

This current repayment of Eurobond has reduced the stock of the external debt acquired through sale of Eurobonds and Sukuks in international markets below the $7 billion mark. Despite facing a foreign exchange reserves crisis, Pakistan had made two repayments of Eurobond worth $2 billion during this fiscal year. According to SBP, during the last week net foreign exchange reserves held by commercial banks declined by $82.4 million to $5.319 billion.

Cumulatively, the total liquid foreign reserves held by the country stood at $ 13.374 billion as of Apr 12, 2024 compared to $13.442 billion as of April 5, 2024, depicting a decline of $68 million.

The country is struggling to come out from a foreign exchange crisis and on completion of the IMF Stand-By Arrangement programme of $3 billion in April, the government officials have initiated negotiations with the IMF for a long-term program.

Finance Minister Muhammad Aurangzeb, who is currently in Washington to attend the spring meeting of 2024 of the World Bank Group and IMF, said in an interview that Pakistan has initiated discussions with the IMF over a new multi-billion-dollar loan agreement to support the economic reform program.

Copyright Business Recorder, 2024

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