The State Bank of Pakistan (SBP) has announced that there is no shortage of US dollars for import payments as the country’s foreign currency reserves of $8.99 billion “are fully usable for all purposes … (and) commercial banks have sufficient dollar liquidity to execute these payments”.
“Import payments of around $4.7 billion have been executed through the inter-bank market during the month (June 2022) so far,” the central bank said on Tuesday.
The central bank released the statement in the backdrop of rumours and speculation that played a key role in triggering a crisis of confidence in the rupee in the inter-bank market.
This led to the labelling of Pakistani rupee as the worst performing currency in Asia in current calendar year 2022.
In the meantime, the country saw a record high inflow of foreign currencies worth $57 million on Tuesday from the overseas Pakistanis through the Roshan Digital Account (RDA).
With this, the cumulative RDA inflows soared to a new record high at $4.5 billion, the central bank reported.
At last, the central bank broke its prolonged silence on the rumours and speculation that had badly damaged the rupee and the country’s economy, saying it “has noticed certain rumours implying that the SBP reserves have dried up or are not usable, that the SBP has stopped import payments, and that banks have run out of US dollars.”
“It is clarified that as of June 10, 2022, the SBP’s liquid foreign reserves stood at $8.99 billion. These do not include gold reserves, and are fully usable for all purposes,” the central bank said on its official Twitter handle.
“SBP has not stopped import payments and commercial banks have sufficient dollar liquidity to execute these payments. Indeed, import payments of around $4.7 billion have been executed through the inter-bank market during the month so far,” the central bank added.
Earlier, the commercial banks informed media outlets that they had run short of dollars to pay for imports. They also speculated that the rupee would nosedive to an unexpected and unrealistic level in the near future.
However, the SBP took a couple of measures to increase the supply of dollar in the inter-bank market and reduce demand to stabilise the dollar reserves.
At the same time, the Ministry of Finance has remained engaged with the International Monetary Fund (IMF) to revive the stalled $6 billion loan programme to improve the country’s capacity to make international payments.
Under the measures taken by the SBP, the commercial banks would seek advance permission from the central bank before processing documents for each import of goods amounting to $100,000 or more. Earlier, the limit for seeking the central bank permission in advance for opening letters of credit was $500,000.
In addition to this, the central bank also reduced the cash reserve requirement (CRR) against the dollar deposits with commercial banks for a limited period of time for some banks. The measure may increase the supply of dollar in the market.
CRR is kept with the central bank which is meant to protect the dollar depositors with commercial banks.
RDA at record highs
The RDA inflows showed that the overseas Pakistanis had full confidence in the country’s economy despite a number of issues and series of rumours and speculation related to the prolonged delay in revival of the IMF loan programme.
“Today marks yet another historic day in Roshan Digital Account, with $57 million in deposit inflows, the highest-ever daily figure. With this significant increase, total deposits in RDA have crossed $4.5 billion. We are humbled by the continuous trust and commitment of our overseas Pakistanis,” the SBP said on its Twitter handle.
Published in The Express Tribune, June 22nd, 2022.
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