KARACHI: Foreign exchange holdings of both the State Bank of Pakistan (SBP) and commercial banks improved during the week ended on March 10 reflecting the higher inflows of remittances and export proceeds.

Pakistan’s overall forex holdings rose by $92m to $9.847bn during the week.

Finance Minister Ishaq Dar on Thursday tweeted that the SBP would soon receive $500 million from the Industrial Credit Bank of China which would increase its reserves to $4.8 billion.

He said the out of ICBC’s approved rollover facility of $1.3bn (which was earlier repaid by Pakistan in recent months) documentation for the second disbursement of $500m has been completed by Finance Ministry for the release of funds to the SBP, he tweeted.

Meanwhile, the central bank on Thursday reported that its foreign exchange reserves witnessed a meagre rise of $18m to $4.319bn during the week, but did not mention the source of this increase. Financial sector experts say the central bank has long been in tradition to buy dollars from the open market to boost its reserves.

Dar says central bank will soon receive $500m from China

At the same time, the forex reserves of commercial banks registered an increase of $74m to $5.52bn during the week indicating improved inflows of export proceeds and remittances thanks to a much higher exchange rate following the ending of an artificial cap on the dollar rate. The rupee managed to recover 43 paise against the US dollar to close at Rs282.42 on Thursday.

Exporters are selling their holdings at the current highly attractive exchange rate hovering around an unprecedented level above Rs282. Bankers said the export proceeds and remittances are collectively providing over $4bn per month to the currency market.

However, the SBP has continued to maintain restrictions for importers to open letters of credit. The dollar-starved country spent $16.3bn only on food and fuel imports during the first seven months of the current fiscal year.

The currency market looks settled at this rate but currency dealers said the rupee could recover once a staff-level agreement is reached with the IMF paving the way for the release of the $1.2bn tranche.

An inordinate delay in the disbursement from IMF is only complicating the financial problems of Pakistan amid growing risks of default. Market experts believe the economic uncertainty may continue till the end of the current fiscal year.

Through another tweet, the finance minister has once again assured the nation that a deal with the IMF would be reached within a few days.

Published in Dawn, March 17th, 2023