During the week ending June 9, 2023, the foreign exchange reserves held by the State Bank of Pakistan (SBP) saw an increase of $107 million, boosting the total to $4 billion. However, subsequent media reports suggested a payment of $1 billion to China, reducing the SBP reserves to $3 billion. The finance ministry has yet to confirm or deny these reports.
Concerns Over IMF Bailout Package
Finance Minister Ishaq Dar expressed dissatisfaction with the International Monetary Fund’s (IMF) handling of Pakistan’s bailout package, accusing the lender of wasting his time. The $6.7 billion loan program is set to conclude on June 30. Before this, Pakistan was to receive two installments totaling about $2.2 billion. Amidst IMF’s concerns over budgetary measures for the fiscal year 2023-24 and warnings from rating agencies, analysts worry about Pakistan’s ability to secure the needed bailout package.
Forex Reserves Impact on Exchange Rate
Analysts noted that Pakistan’s dwindling foreign exchange reserves could impact the country in FY24, regardless of IMF’s support. Currently, the total foreign exchange reserves stand at $9.378 billion, including $5.359 billion held by commercial banks. This low reserve level, covering barely two weeks’ imports, exerts pressure on the exchange rate.
Currency Fluctuations
The SBP’s decision to allow importers to source dollars independently has caused a surge in its rates in the open and grey markets. The open market quoted the dollar rate at Rs295 on Thursday, a slight increase from Rs294 a day earlier. The SBP reported the interbank market’s closing price for the dollar at Rs287.37, a 19-paise increase from the previous day.
