SBP-held reserves move upwards on back of commercial loan

A photo of a person holding US dollar bills. — AFP/File

The State Bank of Pakistan (SBP)-held foreign exchange reserves increased after the struggling economy received another loan.

“The increase in SBP reserves is mainly due to receipt of $300 million of GoP commercial loan,” a statement from the central bank said, as the nation desperately seeks funding to shore up its reserves.

In the statement, the SBP mentioned its reserves have jumped to $4.43 billion as of April 14, which will provide an import cover of less than a month — a position that has been the same for several months now.

Net foreign reserves held by commercial banks stood at $5.53 billion, $1.1 billion more than the central bank, taking the total liquid foreign reserves to $9.96 billion.

Last week, the Industrial and Commercial Bank of China (ICBC) gave Pakistan $300 million, which is reflected in the latest update on the foreign reserves position.

The ICBC had approved the rollover of a $1.3 billion loan facility for Pakistan, part of which had already been returned in two previous disbursements.

Pakistan’s $350 billion economy continues to dwindle amid financial woes and the delay in an agreement with the International Monetary Fund (IMF) that would release much-needed funding crucial to avoid the risk of default.

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

The country is getting closer to securing the loan as it has shared a plan with the IMF for securing an additional $3 billion to bridge the financing gap.

A deal with the IMF will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves.

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