Foreign exchange reserves held by the National Bank of Pakistan (SBP) exceeded $4 billion after realizing $300 million in commercial loans.
Foreign exchange reserves held by the central bank and commercial banks reached $9.3 billion as of June 23, according to a central bank statement.
Of the $9.3 billion, SBP held $4.06 billion in reserves and commercial banks held $5.27 billion.
Pakistan’s foreign exchange reserves have been in negative territory in recent months as it struggles to gain approval for the ninth review of the International Monetary Fund’s (IMF) Extension Fund Facility (EFF).
However, Pakistan failed to complete the tranche and the program ended without completion on 30 June.
But that day, the global financial institution announced that Pakistan and the IMF had reached the long-awaited Staff Level Agreement (SLA) on a $3 billion Standby Agreement (SBA).
The $3 billion financing over nine months has surpassed Pakistan’s expectations. The country was waiting to release the remaining $2.5 billion of a $6.5 billion bailout agreed in 2019 that expired on Friday.
With inflation so high and foreign exchange reserves barely enough to cover a month of import restrictions, Pakistan is facing its worst economic crisis in decades, and analysts say that without an IMF deal. He said he may have defaulted on his obligations.
The deal comes after an eight-month delay and gives Pakistan some respite as it struggles with a serious balance of payments crisis and declining foreign exchange reserves.
In a statement issued today, the IMF said that since the 7th and 8th joint reviews under the 2019 EFF were completed in August 2022, the Pakistani economy will continue to contribute to the livelihoods of millions of Pakistanis. It said it faced several external shocks, including the devastating 2022 floods that affected it. International commodity prices soared as a result of Russia’s war with Ukraine.
Economic growth stalled as a result of these shocks and several policy failures, including shortfalls due to constrained foreign exchange market functioning. “Inflation is very high, including on essential commodities. Foreign exchange reserves have fallen to very low levels despite efforts by the authorities to reduce imports and the trade deficit,” the IMF statement said.
Moreover, the liquidity situation in the power sector remains dire, with further accumulation of circular debt and frequent load shedding, he said.
The Global Financial Institution said the new SBA will support Pakistan’s immediate efforts to stabilize the economy from recent external shocks, maintain macroeconomic stability, and provide a framework for financing from multilateral and bilateral partners. said to support.
“The new SBA will also create room for social and development spending through improved domestic revenue mobilization and prudent spending execution to meet the needs of the Pakistani people.”
The IMF further recommended that Pakistan’s efforts to overcome current challenges include strengthening fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress in reforms to promote climate change, especially in the energy sector. Prudent policy implementation is key, he added. Strengthen resilience and contribute to an improved business environment.