ISLAMABAD-The government is making all-out efforts to take the country’sforeign exchange reserves to $25 billion by June this year, mainly due tothe inflow of foreign loans and improvement in remittances.
The country’s foreign exchange reserves have already started to increasedue to the inflow of foreign loans and surplus current account duringongoing financial year. The State Bank of Pakistan (SBP)’s foreignexchanges reserves have enhanced by $ 378 million in ongoing week due torelease of Extended Fund Facility (EFF) tranche by the InternationalMonetary Fund (IMF). The SBP had recently received $ 498.7 million from theIMF under EFF program, after accounting for external debt repayments, theSBP reserves increased by $ 378 million. With the arrival of the IMFinflows, the SBP’s foreign exchange reserves reached 39-month high level of$13.67 billion at the end of the last week.
The country’s total liquid foreign exchange reserves increased by $ 402million to $20.836 billion. Reserves held by banks rose by $ 24 million to$ 7.16 billion. Pakistan’s foreign exchange reserves have reached at $20.836 billion, highest level after July 2017.
The reserves would increase in the weeks to come, as Pakistan would receivemoney generated from the Eurobonds. The government has raised $2.5 billionin three-dollar bonds of five, 10 and 30 years from the internationalcapital market on Tuesday. Pakistan has concluded its first ever 3-tranchecapital market transaction yesterday. With 5, 10 and 30 years Eurobonds at6 per cent, 7.375 per cent, and 8.875 per cent, leading global investorsshowed great confidence in our country’s economy and future outlook. Thegovernment would also launch Sukuk bonds in international market in nextfew months.
Pakistan would also receive loans from the World Bank and Asian DevelopmentBank, which were recently approved. Pakistan and World Bank had signedagreements worth $1.3 billion for social protection, improving humancapital and building resilience in the country. On Tuesday, the ADBapproved $300 million loan to finance the construction of a 300-megawatthydropower plant. All these inflows would help in building the country’sforeign exchange reserves.
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Officials informed that there is no pressure on the foreign exchangereserves during ongoing financial year due to the improvement in foreignremittances that controlled the current account. The current account isstill in surplus with $881 million during the first eight months (July toFebruary) of 2020-21. During the same period of last year, the countryposted a deficit of $2.741 billion. During eight months of current fiscalyear, the exports declined slightly, but the imports increasedsignificantly thus widening the trade deficit, but the 24 per cent increasein the remittances, sent by overseas Pakistanis helped the current accountto remain positive.
It is worth mentioning here that the government would borrow at least$5.025 billion from the external sources in four months (March to June) ofthe current fiscal year. The government would borrow to maintain itsforeign exchange reserves and to repay previous loans. In July to Februaryperiod of the current fiscal year, the government had received $7.208billion total external inflows from multiple financing sources, which are59 per cent of annual budget estimates of $12.233 billion for the entirefiscal year 2020-21. The major portion of the $7.208 billion was borrowingthe private banks. Pakistan’s foreign commercial loans had recorded $3.110billion during July to February period.
