State Bank foreign currency reserves shore up by $443m

ISLAMABAD: The State Bank of Pakistan’s foreign currency reserves went up by $443 million in one week ended on November 1, 2019 mainly because the central bank is buying dollars to shore up its reserve positions.

Secondly, the government also obtained commercial loans that contributed to raise reserves held by the central bank. The major contribution for shoring up foreign currency reserves was purchasing of dollars by the State Bank of Pakistan (SBP). The central bank used to undertake purchasing operation to the tune of $20 to $50 million on per day basis keeping in view liquidity into the market, said the official.

Top official sources confirmed to The News on Saturday that there were many gossips going on in drawing rooms that NRO was being provided to many political leaders by the PTI-led regime and they might be ready to pay back alleged plundered wealth.

When the State Bank of Pakistan (SBP) issued press statement on last Thursday showing an upsurge in the foreign currency reserves held by the SBP to the tune of $443 million just in period of one week ended on November 1, 2019, it resulted in raising many eyebrows.

When SBP high-ups were inquired they told this scribe that the sudden jump in foreign currency reserves was not result of any borrowing activity so they reluctantly conceded that it seemed that the central bank was purchasing dollars in order to meet requirement of IMF on Net International Reserves (NIR) keeping in view liquidity in the market.

Another official explained that the SBP always used this move in a very cautious manner in order to avoid wrong signaling in the market. “We undertake such kind of operation in gradual manner so that there is no impact on the market situation,” he added. He said that the exchange rate remained almost stable despite major mop up operation done by the central bank to jump up its reserves position.

According to the SBP, Pakistan’s total liquid foreign reserves stood at $15.517 billion on November 1, 2019.The break-up of the foreign reserves position showed that the foreign reserves held by the State Bank of Pakistan stood at $8.357 billion and net foreign reserves held by commercial banks were standing at $7.16 billion.

During the week ending Nov 1, 2019, the SBP’s reserves increased by $443 million to $8.357 billion. Some people are hinting that the hot money was coming into T-bills and PIBs but it could not come directly into SBP account. So the reserves build-up is relied upon purchasing of dollars from the market and obtaining commercial loans. “The SBP might have shown all purchases in one go by taking them into books,” said one official who is familiar with the working of the external sector.

The IMF in latest statement also conceded that the net reserves were increasing. It stated that on the macroeconomic front, signs that economic stability is gradually taking hold are steadily emerging. The external position is strengthening, underpinned by an orderly transition to a flexible, market-determined exchange rate by the State Bank of Pakistan (SBP) and a higher-than-expected increase in SBP’s net international reserves. Budgetary revenue collections are growing on the back of efforts on tax administration and policy changes, and despite the ongoing compression in import-related taxes. Inflation pressures are expected to recede soon, reflecting an appropriate monetary stance. Importantly, measures to strengthen the social safety net are being implemented, and development spending is been prioritised.