The State Bank of Pakistan (SBP) announced that its foreign exchange reserves decreased by $354 million to $4.2 billion as of the week ended March 24, ending their six-week winning streak. This leaves Pakistan with an import cover of less than a month.
Meanwhile, commercial banks hold net forex reserves of $5.6 billion, bringing the country’s total liquid foreign exchange reserves to $9.8 billion.
Pakistan’s $350 billion economy is struggling, and the country is currently in talks with the International Monetary Fund (IMF) to resume a $1.1 billion loan tranche. This loan is part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019. The IMF funding is critical for Pakistan to unlock other external financing avenues and avoid defaulting on its obligations.
The IMF has stated that substantial progress has been made in discussions towards policies in recent days, and financial assurances are standard in IMF programs. Pakistan must provide firm and credible assurances that there is sufficient financing to ensure its balance of payments are fully financed in the next 12 months, with good prospects for financing over the remainder of the program.
To help Pakistan fund its balance of payments, several friendly countries, including Saudi Arabia, China, and the UAE, have made commitments.
The IMF’s Director of Strategic Communications has stressed the importance of timely financial assistance from external partners to support the authorities’ policy efforts and ensure the successful completion of the review with Pakistan.