Pakistan’s foreign exchange reserves doubled, reaching a nine-month high of $8.73 billion, thanks to new debt-financing inflows from the International Monetary Fund (IMF) and friendly countries like Saudi Arabia and UAE. This influx of funds has improved the country’s import capacity to two months, a significant improvement from the critically low one-month level it was at before the IMF awarded a new short-term loan programme worth $3 billion in late June 2023.
The rupee-dollar exchange rate spread between the interbank and open markets has also narrowed down close to the IMF directed level of Rs4. The value of the currency dropped in the former market but rose in the latter on Thursday.
The State Bank of Pakistan (SBP) reported a 93% surge in the country’s reserves, bringing it to $8.73 billion after the IMF disbursed the first loan tranche of $1.2 billion, while Saudi Arabia deposited another $2 billion and the UAE provided a fresh loan of $1 billion last week. Additionally, local commercial banks’ net foreign reserves increased to $5.34 billion in the same period, taking the country’s total reserves to $14.06 billion.
The domestic currency faced a downturn in the interbank market, falling by 0.47% or Rs1.35, to a three-week new low at $285.15 against the US dollar, due to rising demand for foreign currency. However, in the open market, the currency gained 0.17% to Rs289.50 against the greenback, according to the Exchange Companies Association of Pakistan (ECAP).
Published in The Express Tribune, July 21st, 2023.
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