The central bank has met an end-September deadline for a forward book target of $4.2 billion agreed with the International Monetary Fund (IMF), and is comfortably placed to meet others on net international reserves and net domestic assets, the bank said on Friday.
Pakistan is trying to achieve economic recovery under the caretaker government in the wake of a $3 billion IMF loan programme.
Friday’s remarks came from State Bank of Pakistan (SBP) Governor Jameel Ahmad at events held on the sidelines of the IMF and World Bank meetings in Morocco.
“The foreign exchange buffers are improving, with both build-up in reserves and reduction in forward foreign exchange liabilities,” the SBP said in a statement, describing comments Ahmad made to investors.
“SBP is also very comfortably placed to meet the other end-September IMF targets, including Net International Reserves (NIR) and Net Domestic Assets (NDA),” the bank added.
Read: IMF sees large financing needs
Since January 2023, the bank’s foreign exchange reserves have improved from a low of $3.1 billion to $7.6 billion by the end of September. The build-up of reserves was largely supported by non-debt creating inflows amid favourable market conditions, it said.
“At the same time, SBP’s forward foreign exchange liabilities have declined and the forward book target of $4.2 billion for end-September 2023 agreed with the IMF has already been met by a wide margin,” the bank said.
The SBP governor told international investors that Pakistan’s stabilisation measures had started yielding results with inflation coming down and the position of external account improving.
Read more: IMF’s neo-projection
He was briefing the investors during events organised by global banks, including Barclays, JP Morgan, Standard Chartered and Jefferies.
He said that inflation had come down to 31.4% in September 2023 after peaking at 38% in May and was expected to continue its downward trajectory over the coming months. On the other hand, the external account has improved considerably and foreign exchange buffers are being built up.
Ahmad shared that with the policy rate at 22%, the SBP assessed that the real interest rates were turning substantially positive on a forward-looking basis, as inflation was expected to come down significantly during the second half of current fiscal year.
(With additional input from APP)
Published in The Express Tribune, October 14th, 2023.
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