Gaining Journey Ends: SBP Reserves Fall by $354mn

March 30, 2023 (MLN): Snapping the winning streak of six consecutive increases, the foreign exchange reserves held by the State Bank of Pakistan (SBP) recorded a drop of by $354 million or 7.7% WoW to $4.24 billion during the week ended on March 24, 2023, according to the data released by the central bank on Friday.

Similarly, the country's total reserves decreased by $323.3mn or 3.18% WoW to $9.81bn.

However, the reserves held by commercial banks moved up by $31.1mn or 0.56% WoW to $5.57bn.

In the absence of the most awaited IMF tranche and financial assistance from friendly countries, the foreign exchange reserves have joined back their losing journey.

During the previous weeks, the central bank witnessed a boost of $1.6bn since February 2023. 

On March 19, 2023, the central bank received $500mn from the Industrial and Commercial Bank of China (ICBC) as Pakistan completed the necessary documentation for disbursement.

Pakistan had earlier received $500mn from ICBC as the first of three disbursements approved for rollover, and the completion of documentation for the second disbursement of $500mn was announced by Dar on Thursday.

The Chinese bank had approved a rollover facility of $1.3bn, which Pakistan had repaid in recent months. The country is also expecting another $800mn from ICBC after renewing its $1.3bn facility, which it had repaid earlier.

On the other hand, the IMF is emphasizing for timely financial assistance from external partners to support Pakistan's economic policy efforts to ensure the successful completion of the review.

In the latest development, the fund asked the government to submit the complete plan for petrol subsidy as the fund has rejected the initial version of the proposal for the subsidy.

To recall, on March 20, Prime Minister Shehbaz Sharif announced a relief package for the poor which includes a subsidy of Rs50 per litre of petrol for low-income individuals who own small vehicles such as motorcycles, rickshaws, and 800cc cars. 

However, right after this announcement, Esther Perez Ruiz, the IMF's resident representative in Pakistan said that the government did not consult with the fund about the fuel pricing scheme.

She mentioned that once the remaining points, including the fuel scheme, were settled, a staff-level agreement will be signed.

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