For the first time since October 2022, the State Bank of Pakistan (SBP)’s foreign exchange reserves have exceeded $8 billion in the week ending July 14, providing sufficient cover for up to two months of imports.
According to a statement issued by the central bank, the total liquid foreign reserves held by the country have reached $14.06 billion. This includes $8.7 billion in the SBP’s reserves and $5.3 billion held by commercial banks. “During the week ended on July 14, 2023, the SBP received $2 billion from the Kingdom of Saudi Arabia, $1.2 billion from IMF, and $1 billion from the U.A.E. Consequently, the SBP reserves increased by $4.203 billion to $8.727 billion,” read the statement.
Pakistan has been in the midst of a balance of payments crisis for the past year, with the situation worsening in November when the IMF refused to release a $1.1 billion tranche of a $6.5 billion Extended Fund Facility (EFF) inked between the government and the global lender. After several months of back-and-forth, an IMF team visited Pakistan in January to conduct the ninth review, but a resolution could not be achieved and the program remained suspended until its expiration on June 30.
The delay in reviving the IMF program had raised concerns about the country defaulting, but through strenuous efforts by Prime Minister Shehbaz Sharif, disaster was averted when the lender and Pakistan entered into a $3 billion, nine-month stand-by arrangement aimed at shoring up the country’s efforts at economic reform.
The SBA subsequently unlocked additional inflows, including from Saudi Arabia and the U.A.E., with the government claiming further financial support is expected from the World Bank and other lenders in the days to come.