Pakistan’s forex reserves surpass $4b with $300m commercial loan

Karachi: The State Bank of Pakistan (SBP) on Monday witnessed a significant increase in its forex reserves, surpassing the $4 billion mark, thanks to the realization of a $300 million commercial loan.

According to an official statement from the central bank, the combined reserves of the SBP and commercial banks reached $9.3 billion as of June 23.

Out of this total, the SBP's reserves amounted to $4.06 billion, while commercial banks held $5.27 billion in reserves.

For the past few months, Pakistan's reserves position had been in negative territory due to the challenges in securing approval for the ninth review of the Extended Fund Facility (EFF) with the International Monetary Fund (IMF).

Unfortunately, Pakistan was unable to achieve the tranche, leading to the program's conclusion on June 30 without its completion.

However, shortly after the program ended, Pakistan and the IMF reached a long-awaited staff-level agreement (SLA) on a $3 billion "stand-by arrangement" (SBA), as announced by the global lender.

Facing high inflation and foreign exchange reserves that barely cover one month of controlled imports, Pakistan has been grappling with its most severe economic crisis in decades, which could have potentially led to a debt default in the absence of the IMF deal, according to analysts.

The agreement, which arrived after an eight-month delay, provides some relief to Pakistan as it confronts a severe balance of payments crisis and dwindling foreign exchange reserves.

In its statement, the IMF highlighted that since the completion of the combined seventh and eighth reviews under the 2019 EFF in August 2022, Pakistan's economy has faced various external shocks, including devastating floods in 2022 that impacted millions of people and a spike in international commodity prices due to Russia's war in Ukraine.

The $3 billion funding, spanning nine months, exceeded expectations for Pakistan, which had been awaiting the release of the remaining $2.5 billion from a $6.5 billion bailout package agreed upon in 2019, which expired on Friday.