SBP reserves fall to $4.5b after debt repayments to foreign banks

Two separate repayments of $600 million and $415 million have been made to two Dubai-based banks, say sources


Irshad Ansari January 09, 2023
Strengthening of the US dollar against other global currencies like the euro and pound carries a potential threat to the value of Pakistani rupee. photo: file

ISLAMABAD:

The foreign exchange reserves held by the central bank fell to $4.5 billion after Pakistan returned over $1 billion loans of two foreign commercial banks, hardly enough to finance 25 days of import.

Two separate repayments of $600 million and $415 million have been made to two Dubai-based commercial banks, sources said on Saturday.

After the loans repayments, Pakistan is left with less than 25 days of import cover.

It is pertinent to mention here that the economic activities in the country have already been severely affected due to depleting reserves, devaluation of local currency and non-opening of letter of credits (LCs) for private companies.

Major industries including car manufacturing companies have temporarily closed their plants due to import restrictions.

Sources said that Pakistan is expecting to raise around $1.5 to $2 billion worth of funds in foreign aid during Geneva Conference to be held next week for the country’s flood victims.

Besides, efforts are also underway to arrange loans from Saudi Arabia and China.

Also read: PM in last-gasp bid to revive IMF talks

It is expected that Pakistan and International Monetary Fund ((MF) will hold discussion next week for the completion of the pending 9th review of the programme.

If the pending review is completed successfully, Pakistan will get a loan instalment of over $1 billion from the IMF.

Prime Minister Shehbaz Sharif has also requested the IMF managing director to immediately send over a team to the country to start review negotiations for the next tranche of its loan.

While speaking at the inauguration of Hazara Electric Supply Company (HAZECO) in Islamabad on Friday, the premier also confirmed a story of The Express Tribune that he had a telephonic conversation with IMF Managing Director Kristalina Georgieva on Thursday.

“I asked her to send an IMF team for the completion of the pending 9th review of the programme so that the next loan tranche is released,” he told the gathering while referring to his telephonic conversation with Georgieva a day earlier. “She assured that the mission will visit [Pakistan] in the next two to three days.”

However, the finance ministry sources said no dates for the IMF review mission had been finalised yet.

Finance Minister Ishaq Dar would leave for Geneva along with PM Shehbaz and meet IMF officials on the sidelines of a conference there. The conference has now been lowered to a climate resilience event from a donors’ conference because of lack of interest by major players.

The premier’s direct intervention in the IMF programme talks suggests that the matters have slipped out of the hands of the finance ministry.

The 9th review talks have been pending since October last year, resulting in the withholding of a $1.1 billion loan tranche. Pakistan is keen to complete the 9th review so that the World Bank and Asian Infrastructure Investment Bank (AIIB) may also release their loans.

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