The State Bank of Pakistan (SBP) has reported a substantial increase in the country’s foreign exchange reserves, providing a much-needed boost to Pakistan’s import cover. The rise in reserves is attributed to the realization of proceeds from a government commercial loan and holds promise for future financial stability.
Foreign Exchange Reserves Reach $4.070 Billion
According to data released by the State Bank of Pakistan, the country’s foreign exchange reserves surged by $533 million in just one week. On 23rd June, the reserves stood at $4.070 billion, compared to $3.537 billion recorded on 16th June. This increase is primarily attributed to the realization of $300 million in proceeds from a government commercial loan. The boost in reserves not only bolsters the nation’s economic stability but also improves its capacity to meet import demands.
The recent increase in foreign exchange reserves is a significant milestone for Pakistan, as it experienced a dip below the $3 billion mark earlier this year. However, except for two instances, the reserves have managed to remain above $4 billion (measured by week-end levels). This upward trend in reserves provides a cushion for the country’s economy against external shocks.
IMF Agreement and Future Prospects
Last week, Pakistan reached a staff-level agreement with the International Monetary Fund (IMF) on policies supported by a standby arrangement (SBA) worth approximately $3 billion. While the staff-level agreement is awaiting approval from the IMF Executive Board, it holds the potential to secure financial assistance from friendly countries and multilateral partners. This additional support is expected to further strengthen Pakistan’s central bank reserves in the upcoming months.
The surge in foreign exchange reserves has already yielded positive results, with the country’s overall liquid foreign currency reserves, including those held by banks other than the SBP, reaching $9.341 billion. This represents a $477 million increase from the previous week. Although net reserves held by banks experienced a minor decline of $56 million, the growth in the central bank’s reserves compensated for it, ensuring a favorable outlook for Pakistan’s import cover.