SBP-held forex reserves register meagre drop

As the International Monetary Fund (IMF) programme remains stalled and Islamabad's economic woes persist, the State Bank of Pakistan (SBP)-held foreign exchange reserves fell further.

The central bank, in its weekly bulletin, said that its forex reserves have decreased by $36 million to $4.2 billion as of the week ended March 31, which will provide an import cover of less than a month.

The net forex reserves held by commercial banks stand at $5.51 billion, $1.3 billion more than the SBP, bringing the total liquid foreign exchange reserves of the country to $9.75 billion, the statement mentioned.

Pakistan's $350 billion economy continues to dwindle amid financial woes and the authorities struggle to strike a staff-level agreement with the IMF.

The Washington-based lender has been in talks with the Pakistani authorities since end-January to resume the $1.1 billion loan tranche held since November, part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.

The IMF funding is critical for Pakistan to unlock other external financing avenues to avert a default on its obligations. 

The IMF has asked Pakistan to secure assurances on external financing from friendly countries and multilateral partners to fund its balance of payment gap for this fiscal year, which ends in June.

In this regard, Saudi Arabia has assured the Washington-based lender that it would provide $2 billion in additional deposits to Pakistan, according to a report published in The News.

The assurance from Saudi Arabia helped the Pakistan rupee recover from a historic low and boosted investors' confidence in the stock market, sending it above the 40,000 points mark.

Minister for Finance and Revenue Ishaq Dar also held a meeting with US Ambassador to Pakistan Donald Blome, which, according to sources, has assured America's support for Pakistan to unlock the stalled IMF programme.

However, World Bank and Asian Development have projected Pakistan's GDP to fall below 1% in the ongoing fiscal year, while warning that the non-completion of the IMF programme, failure to secure financing from key bilateral partners and political instability may result in an eruption of a major macroeconomic crisis.