State Bank of Pakistan (SBP) holds $4.09 billion in forex reserves as the country struggles with liquidity and considers starting a new bailout program with the International Monetary Fund (IMF) without concluding the current one.
The SBP indicated in a statement that as of the week ended May 26, as a result of external debt repayments, its forex reserves had decreased by $102 million and now stand at $4.09 billion, with an import cover of less than a month.
Business banks’ online forex reserves now total $5.42 billion, a $116 million decrease. However, it had been $1.33 billion more than the central financial institution’s reserves.
Total Forex Reserves as of May 2023
The country’s total liquid forex reserves are at $9.51 billion.
This is the seventh consecutive week in which the forex reserves have decreased, with Pakistan seeing no signs of obtaining outside finance anytime soon due to political unrest, which has significantly contributed to the weakening economy.
The $350 billion economy is in disarray due to financial difficulties and the delay in reaching an agreement with the IMF that might release much-needed cash necessary to avert the risk of default.
In order to renew the $1.1 billion mortgage tranche that has been on hold since November as part of a $6.5 billion Prolonged Fund Facility (EFF) agreed upon in 2019, the federal government has been in discussions with the Washington-based lender since end-January.
However, sources informed a news agency that Pakistan had decided to negotiate a new program with the IMF immediately following the budget because the coalition government intends to wrap up the $6.5 billion EFF without completing all outstanding reviews.
Since November, the coalition government has been in talks with the Washington-based lender to resurrect its bailout program. One of the biggest obstacles has been the finance gap.
The $6.5 billion program, which is set to expire on June 30, has around $2.5 billion left to distribute.
According to the sources, although the ninth evaluation negotiations were nearly complete, a staff-level agreement has not yet been reached. The tenth and eleventh opinions will continue to be pending even after this examination is finished.
“Completion of each opinions earlier than June 30 appears unimaginable and the federal government has determined in opposition to looking for an extension,” sources said, the Ishaq Dar-led Ministry of Finance will approach the Fund for a new project following the budget, which is anticipated to be presented on June 9.
The sources also said that the caretaker government would continue talks with the Washington-based lender if the coalition government was unable to reach an agreement before its term ended in August.
The sources revealed some of the specifics of the new program, saying that the financial team has started working on the agreement, “which is predicted to be harder” than the current program approved in 2019 by the Pakistan Tehreek-e-Insaf (PTI) government.
They also mentioned that the next bailout program would probably last for more than three years. “Pakistan will desperately want an IMF program in September because the nation must pay round $September 11 billion {dollars} in repayments of exterior debt by December 2023,” they added.
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