Foreign exchange reserves held by the State Bank of Pakistan (SBP) have seen a modest increase as the cash-strapped country desperately tries to unwind a key International Monetary Fund (IMF) loan tranche. is doing – which will pave the way for further funding.
The central bank said in a statement, without giving reasons, that its foreign exchange reserves rose by $66 million to $3,258.5 million for the week ended February 17, which would provide about three weeks of import cover.
Net foreign reserves held by commercial banks are $5,468.0 million, which is $2,209.5 million more than SBP, bringing the total liquid foreign reserves to $8,726.5 million.
Foreign exchange reserves are expected to increase next week as the China Development Bank board has approved a $700 million facility for Pakistan, according to Finance Minister Ishaq Dar, and the funds could be deposited into the State Bank account this week. are
The Washington-based lender and Pakistani officials began talks on Wednesday – days after an IMF mission left Islamabad without signing a staff-level agreement despite 10 days of talks.
“The IMF program will be revived soon, God willing, because there are one or two things that need to be implemented,” Prime Minister Shahbaz Sharif said during his address to the federal cabinet in Islamabad.
In an effort to restart the delayed IMF program and avoid a default, the current government has taken steps in the past two months to raise new taxes, increase energy prices, and loosen its grip on the rupee.
Parliament last Monday approved a supplementary finance bill that raises sales tax on imports from cars and home appliances to chocolate and cosmetics from 17 percent to 25 percent.
People will also have to pay more for business class air travel, wedding halls, mobile phones and glasses. General sales tax has been increased from 17% to 18%.
To ensure that austerity measures during the economic crisis start at the top, Prime Minister Shehbaz on Wednesday unveiled cost-cutting measures to save $764 million annually.
“It is the need of the hour,” he said after the cabinet meeting. “We have to show what the times demand of us and that is austerity, austerity and sacrifice.”
Fitch Ratings – a global credit rating agency – has downgraded the $350 billion economy twice in four months, citing a drop in foreign reserves.
Pakistan has paid out $542.5 million in coupons this year, according to JEE News data. In total, the country owes $8 billion in bonds through 2051 with the next payment of $1 billion due in April next year. Most of the country’s external debt of about $100 billion is secured through concessional multilateral and bilateral sources.
Not only debt, Pakistan is also facing dollar shortage which tests its external stability. Supply disruptions could push inflation above 30 percent for the first time due to floods, food shortages and the government’s measures to meet IMF preconditions for a bailout, according to JEE News.
