KARACHI: In an interesting turn of events, the foreign exchange reserves held by the central bank have increased by a massive 14.86% on a weekly basis, according to data released on Thursday.
The development came after China announced that it would immediately give a $2-billion loan to Pakistan, a move meant to arrest the slide in official foreign currency reserves and provide much-needed breathing space to the new government.
According to officials in the Ministry of Finance, the loan will be categorised as official bilateral inflow. Over $1 billion has already been transferred to the State Bank of Pakistan’s (SBP) accounts.
On July 27, the foreign currency reserves held by the SBP were recorded at $10,349.7 million, up $1.34 billion compared with $9,010.7 million in the previous week.
The central bank attributed the increase to official inflows.
Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $17,079.7 million. Net reserves held by banks amounted to $6,730 million.
Earlier, the reserves had dipped to alarmingly low levels, forcing the SBP to let the rupee depreciate massively on four separate occasions since December 2017, sparking concerns about the country’s ability to finance a hefty import bill and meet debt obligations in coming months.
In April, the SBP’s reserves had increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.
A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).
In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.