ISLAMABAD-The government is making all-out efforts to take the country’s foreign exchange reserves to $25 billion by June this year, mainly due to the inflow of foreign loans and improvement in remittances.
The country’s foreign exchange reserves have already started to increase due to the inflow of foreign loans and surplus current account during ongoing financial year. The State Bank of Pakistan (SBP)’s foreign exchanges reserves have enhanced by $ 378 million in ongoing week due to release of Extended Fund Facility (EFF) tranche by the International Monetary Fund (IMF). The SBP had recently received $ 498.7 million from the IMF under EFF program, after accounting for external debt repayments, the SBP reserves increased by $ 378 million. With the arrival of the IMF inflows, 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 $ 402 million 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 receive money generated from the Eurobonds. The government has raised $2.5 billion in three-dollar bonds of five, 10 and 30 years from the international capital market on Tuesday. Pakistan has concluded its first ever 3-tranche capital market transaction yesterday. With 5, 10 and 30 years Eurobonds at 6 per cent, 7.375 per cent, and 8.875 per cent, leading global investors showed great confidence in our country’s economy and future outlook. The government would also launch Sukuk bonds in international market in next few months.
Pakistan would also receive loans from the World Bank and Asian Development Bank, which were recently approved. Pakistan and World Bank had signed agreements worth $1.3 billion for social protection, improving human capital and building resilience in the country. On Tuesday, the ADB approved $300 million loan to finance the construction of a 300-megawatt hydropower plant. All these inflows would help in building the country’s foreign exchange reserves.
Officials informed that there is no pressure on the foreign exchange reserves during ongoing financial year due to the improvement in foreign remittances that controlled the current account. The current account is still in surplus with $881 million during the first eight months (July to February) of 2020-21. During the same period of last year, the country posted a deficit of $2.741 billion. During eight months of current fiscal year, the exports declined slightly, but the imports increased significantly thus widening the trade deficit, but the 24 per cent increase in the remittances, sent by overseas Pakistanis helped the current account to 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) of the current fiscal year. The government would borrow to maintain its foreign exchange reserves and to repay previous loans. In July to February period of the current fiscal year, the government had received $7.208 billion total external inflows from multiple financing sources, which are 59 per cent of annual budget estimates of $12.233 billion for the entire fiscal year 2020-21. The major portion of the $7.208 billion was borrowing the private banks. Pakistan’s foreign commercial loans had recorded $3.110 billion during July to February period.