SBP reserves surge $1.27bn to $11.23bn

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–SBP received $2.05bn in official inflows last week 

–Reserves calculated after taking into account external debt payments of $809m

KARACHI: The net foreign exchange reserves held by the State Bank of Pakistan (SBP) increased by $1.27 billion to $11.23 billion during the week ending July 2, 2020, according to data released by the central bank on Thursday.

Net foreign reserves held by commercial banks decreased very slightly, from $6.76 billion to $6.74 billion.

The total liquid foreign reserves held by the country rose from $16.73 billion in the week ending June 19 to $17.97 billion during the week under review.

This sharp increase has come on the back of $2.05 billion worth of official inflows received by the SBP during the period under review. This included $737 million from the World Bank, $503 million from Asian Development Bank, $500 million from the Asian Infrastructure Investment Bank and $300 million as GOP loan disbursement from China.

The current SBP reserves figure has been calculated after taking into account government external debt payments of $809 million.

During the ongoing week, the SBP has received an additional $1 billion as GOP loan disbursement from China. These funds will be part of SBP weekly reserves data as of July 3, and will be released on July 9.

These funds are critical for the SBP, as they act as an important buffer. Analysts had previously said that the surprise decision to cut the interest rate by 100 basis points to 7pc on June 25 took into account the incoming inflows, among other factors.

The logic is that the SBP waited in order to make sure it had some reserves before cutting the interest rate again. That way, the extra reserves could act as a buffer to offset any outflows due to the reduced policy rate.

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