Amid a liquidity crunch being faced by Pakistan, the country’s foreign exchange reserves held by the State Bank of Pakistan (SBP) got a slight boost of more than $100 million.
As per a statement issued by the central bank, the country’s total liquid foreign reserves stood at $9.4 billion for the week ending on June 9.
A breakdown showed that foreign reserves held by the SBP stood at $4.018 billion, while the reserves held by commercial banks stood at $5.4 billion
The central bank stated that the reserves held by itself increased by $107 million during the week that ended on June 9.
According to Arif Habib Limited, this means that Pakistan has import cover for less than a month.
This is the first time in six weeks that the foreign exchange reserves have increased.
Pakistan is working to revive the stalled International Monetary Fund (MF) programme expiring this month as it faces a severe liquidity crunch.
However, Pakistan is seeing no signs of securing external financing any time soon amid political instability — which has had a huge impact on the deteriorating economy.
The $350 billion economy is in turmoil amid financial woes and the delay in an agreement with the IMF that would release much-needed funding crucial to avoid the risk of default.
The government has been in talks with the Washington-based lender since end-January to resume the $1.1 billion loan tranche that has been on hold since November, part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.
Meanwhile, Pakistan has requested China to refinance commercial loans of $1.3 billion within the ongoing month but despite that, without the revival of the IMF programme, the foreign exchange reserves held by the State Bank of Pakistan might drop to below $3 billion.
Sources told The News on Wednesday night that Pakistan and IMF high-ups were making last-ditch efforts for reviving the stalled Fund-sponsored programme under the EFF and the next 48 hours were crucial for achieving a breakthrough.
It is expected that the Chinese banks might re-finance commercial loans before June 30. Now another China SAFE deposit of $1 billion will be rolled over within the ongoing financial year.
The problem arises with the repayment of $900 million to multilateral creditors by the end of June 2023 in the shape of principal and mark-up repayments. With rollover and refinancing of $2.3 billion from China, Pakistan’s foreign exchange reserves would still go down below the $3 billion mark.
An official said: “There is a need to ascertain repayment requirements ranging around $4-6 billion from July to November period in 2023 when there will be a political transition happening in the country.
“How will the bridge financing of $4 to $6 billion be managed after the installation of caretaker setup around August 12, 2023, when the existing PDM-led government and National Assembly will complete their stipulated timeframe and tenure.”
The IMF has also asked the government to jack up the Federal Board of Revenue’s (FBR) tax collection target close to Rs9.8 trillion instead of seeking a target of Rs9.2 trillion.
The IMF also considered the non-tax revenue target of Rs2.9 trillion as unrealistic. Pakistan will have to bring major changes in the budgetary framework if it wants to strike a broader agreement on budgetary numbers for the next financial year.
Earlier today, Finance Minister Ishaq Dar said that Pakistan is a sovereign country and cannot accept everything the lender demands.
Addressing the Senate Standing Committee on Finance and Revenue, he responded to the IMF objection to the tax exemptions given in the recently unveiled budget.
“Pakistan is a sovereign country and cannot accept everything from the IMF,” the financial czar told the parliamentarians. He also added that as a sovereign country, Islamabad should have the right to give some tax concessions. “The IMF wants us not to give tax concessions in any sector.”
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