ISLAMABAD-Pakistan’s foreign exchange reserves would improve in the weeks to come due to inflows from International Monetary Fund (IMF) and expected auction of Eurobonds in international market.
Pakistan has completed almost all the prior actions of the IMF before its executive board meeting to approve the next tranche for the country. Officials of the ministry of finance informed that IMF’s board meeting would be held by the end of current month (March) to consider approving third tranche worth around $500 million for Pakistan. Pakistan and IMF had recently revived the programme after Islamabad accepted all tough conditions including increasing power tariff.
Meanwhile, an official informed that government is working to issue Eurobonds in international market to generate foreign exchange reserves. “Initially, we have estimated to raise around up to one billion dollars from the issuance of the Eurobonds,” he said and added that the government would determine the actual size of the Eurobonds after reviewing the situation of the international market. He informed that earlier the government was planning to issue Eurobonds as well as Sukuk bonds in international market. The government had faced strong opposition in the federal cabinet and on the social media when it moved a summary for launching Sukuk bond on the basis of F-9 Park Islamabad holding it as asset back for issuing the bond. Later, the cabinet members had also opposed it. Therefore, the government has decided to issue only Eurobonds and dropped the proposal of Sukuk bonds in the international market.
The inflow from the IMF as well Eurobonds would help in building the country’s foreign exchange reserves. The total liquid foreign reserves held by the country stood at $20.157 billion on 05-March-2021. The foreign reserves held by the State Bank of Pakistan are $13.016 billion and net foreign reserves held by commercial banks are $7.141 billion.
The government is making arrangement to build the foreign exchange reserves of the country, which are expectedly to come under pressure in the months to come due to the massive repayment against previous loans and resurgence of current account deficit. The country has to repay over $7 billion to the different countries and institutions before June this year, which would put pressure on the country’s foreign exchange reserves.
Meanwhile, resurgence of current account deficit may also pose threat to the external sector. Earlier, the current account was in surplus for few months, which helped in sustaining the foreign exchange reserves of the country. The official documents showed that Pakistan would have to repay around $7 billion in six months (January to June) of the ongoing financial year. The amount included principal as well as interest payment. The documents showed that Pakistan has to repay $10.4 billion to the external sources in entire current fiscal year.
Follow the PNI Facebook page for the latest news and updates.
