KARACHI, July 7, 2023: Pakistan’s foreign exchange reserves held by the central bank increased by $393 million to $4.462 billion in the week ending June 30, the State Bank of Pakistan reported on Thursday.
The total reserves of the central bank rose by $405 million to $9.745 billion, while the reserves of commercial banks increased by $12 million to $5.282 billion, according to The News.
The SBP ascribed an increase in the foreign exchange reserves to the receipt of official inflows.
The country paid China $1.3 billion in external debt last month, but as per the arrangement with Pakistan, Beijing refinanced it with Islamabad to increase its dwindling foreign exchange reserves and prevent default.
June was the due date for $1.3 billion in Chinese commercial loans. According to the schedule, Pakistan paid $300 million in debt to the Bank of China and $1 billion to the China Development Bank.
China has refinanced the $1.3 billion in maturing commercial loans that Pakistan requested be refinanced quickly. Of the total money, $1.3 billion was received last month.
The reserves are expected to improve as a result of the IMF deal.
SBP Governor Jameel Ahmad, at an event on Tuesday, said the IMF bailout would help shore up the country’s foreign exchange reserves.
He said Pakistan paid all of its debts to foreign creditors on time and anticipated improved flows, which would be advantageous.
The cost of insuring Pakistan’s sovereign debt against default has dropped significantly due to foreign investors’ growing confidence that Pakistan’s default risk has been eliminated, at least until it is an International Monetary Fund (IMF) programme.
Last week, Pakistan clinched a staff-level agreement with the IMF to release $3 billion in critical bailout funds after a long, drawn-out review process for the cash-strapped economy since November last year.
The Extended Financing Facility programme, which was signed in 2019, expired on Friday. Therefore the agreement is under a stand-by arrangement (SBA).
The Executive Board will meet on July 12, 2023, to discuss details about a nine-month SBA, according to the IMF announcement to the media.