Karachi: Pakistan’s State Bank of Pakistan (SBP) foreign exchange reserves increased by over $100 million amid a liquidity crisis.
For the week ending June 9, the central bank reported $9.4 billion in liquid foreign reserves.
A breakdown indicated that SBP foreign reserves were $4.018 billion and commercial bank reserves were $5.4 billion.
The central bank said its reserves climbed by $107 million in the week ending June 9.
Arif Habib Limited says Pakistan has import cover for less than a month.
Foreign exchange reserves increased for the first time in six weeks.
Pakistan is trying to revive the International Monetary Fund (MF) programme that expires this month due to a financial crisis.
Due to political uncertainty, Pakistan is unlikely to secure external financing, which has hurt the economy.
The $350 billion economy is in disarray due to financial issues and the IMF’s delay in releasing money.
Since end-January, the government has been in talks with the Washington-based lender to resume the $1.1 billion loan tranche that has been on hold since November, part of a 2019 $6.5 billion Extended Fund Facility (EFF).
Pakistan has asked China to refinance $1.3 billion in commercial loans this month, but without the IMF plan, the State Bank of Pakistan’s foreign exchange holdings might fall below $3 billion.
On Wednesday night, sources told that Pakistan and IMF officials were making last-ditch efforts to revive the stalled Fund-sponsored EFF initiative and that the next 48 hours were essential.
Chinese banks may refinance commercial debts before June 30. Another $1 billion China SAFE deposit will roll over this year.
Repaying multilateral creditors
Repaying multilateral creditors $900 million in principal and mark-up by June 2023 is the issue. Pakistan’s foreign exchange reserves would drop below $3 billion even with China’s $2.3 billion rollover and refinancing.
“There is a need to ascertain repayment requirements ranging around $4-6 billion from July to November in 2023 when there will be a political transition,” an official said.
“How will the bridge financing of $4 to $6 billion be managed after the caretaker setup around August 12, 2023, when the PDM-led government and National Assembly will complete their stipulated timeframe and tenure?”
The IMF also advised the government to raise the Federal Board of Revenue’s (FBR) tax collection target to Rs9.8 trillion from Rs9.2 trillion.
The IMF regarded the Rs2.9 trillion non-tax revenue target implausible. If Pakistan wants to reach a comprehensive budgetary agreement for the next fiscal year, it must overhaul its budgetary system.
Pakistan is sovereign and cannot accept all lender demands, Finance Minister Ishaq Dar remarked earlier today.
He addressed the IMF’s criticism to the budget’s tax exemptions before the Senate Standing Committee on Finance and Revenue.
“Pakistan is sovereign and cannot accept everything from the IMF,” the financial czar told legislators. Islamabad should be able to grant tax breaks as a sovereign nation, he added. “The IMF wants no sectoral tax concessions.”
