KARACHI: The foreign exchange reserves held by the State Bank of Pakistan (SBP) rose by $556 million during the week ended on Feb 24.

The central bank on Thursday reported that during the week the SBP received a $700m commercial loan from China Development Bank.

After accounting for external debt repayments, the third weekly increase pushed up the SBP reserves to $3.814 billion but still not even sufficient to cover the country’s import bill for a month.

The SBP reserves have been falling for quite a long period amid persistent political and economic instability and this was the first inflow from China during the current calendar year. Pakistan has been asking for a rollover of Chinese debt but so far no official response was announced.

Pakistan owes $30bn to China

Despite several requests, Islamabad could not secure a guarantee from Beijing regarding the rollover of debts due to a delay in reaching a deal with the IMF a key hurdle for unlocking inflows from other multilateral lenders and friendly countries.

The country has been in talks with the fund but so far no result could be achieved. On Thursday, the finance minister hoped that a staff-level agreement with IMF is likely to be signed next week paving the way for the release of a $1.2bn tranche.

The weak external account position has also barred Pakistan from entering the international market for borrowing or launching sovereign bonds amid serious questions about the country’s capacity to meet its external debt repayment obligations. This situation has brought the local currency under extreme pressure which lost over 7pc of its value in a single day against the US dollar.

The forex holdings of the commercial banks were $5.454bn while the country’s total foreign exchange reserves were $9.268bn during the week under review.

Published in Dawn, March 3rd, 2023