SBP’s Forex reserves rise above $4b on Chinese loan

From Zeeshan Mirza

KARACHI: The State Bank of Pakistan (SBP)-held foreign exchange reserves rose above the $4 billion mark after the cash-strapped nation received a $500 million loan from a Chinese bank. The central bank, in its weekly bulletin, said that its foreign exchange reserves have increased by $487 million to $4,301 million as of the week ended March 3, which will provide an import cover of around a month.

The SBP received $500 million last week from the Industrial and Commercial Bank of China (ICBC) as part of the institution’s $1.3 billion facility, just days after it had received $700 million from the China Development Bank.

Pakistan hasn’t received funds from any friendly country except for China as the $350 billion economy struggles to revive the stalled International Monetary Fund (IMF) programme.

Cash-strapped Pakistan has been trying to secure the IMF bailout to avert a debt default, unlock more funding and stave off severe supply shortages. There are $7 billion of repayments in the coming months, including a Chinese loan of $2 billion due in March, according to Fitch Ratings.

The nation needs to repay about $3 billion dues in the upcoming payments while $4 billion is expected to be rolled over, SBP Governor Jameel Ahmad said in an analyst briefing after the announcement of the monetary policy rate — which has been jacked by to a 27-year high of 20%.

But as the IMF deal sees a dealy, the Pakistan rupee has plunged to historic lows and closed at 282.30 against the dollar in the interbank market — and if all goes well for Pakistan in the coming days, experts believe that the local currency can only recover to 265.

In his address to an event earlier on Thursday, Finance Minister Ishaq Dar said that the IMF was “satisfied” with Pakistan’s actions, but the staff-level agreement could not be signed this week.

“We seem to be very close to signing the staff-level agreement hopefully in the next few days,” Dar said in his address during a seminar titled “Reviving Economic Stability through the Strengthening of Public Financial Management” in the federal capital.

Due to a shortage of dollars, the government has also imposed restrictions on imports — resulting in the partial closure of not only textile but automobile manufacturers as well, prompting unemployment fears.