KARACHI: The foreign exchange reserves of both State Bank and commercial banks shot up during the week ending on May 10, the central bank reported on Thursday.

Reserves held by commercial banks showed a bigger jump than those with the State Bank, going up by $152 million to $5.491 billion, while the SBP’s reserves rose by $15m to $9.135bn.

During the current month, the central bank received $1.1bn from the IMF as the last tranche of a $3bn Stand-By Arrangement. It pushed up the total reserves by more than $9bn. The IMF was willing to see the reserves above $9bn at the end of the current fiscal year FY24. It looks like the condition has been met with the help of the IMF.

Commercial banks have shown a significant growth in their reserves, reflecting higher inflows and lower outflows. Total reserves of the country reached $14.626bn during this week.

Commercial banks’ forex holdings rise by $152m and SBP’s $15m

According to researchers, the current reserves of the State Bank are barely enough for seven weeks (almost two months) of imports. Economists don’t see this as a good sign. They consider reserves covering three months of imports as reasonable..

Although the trade deficit has come down substantially of late, it was still $19.7bn for the first 10 months of the current fiscal. However, a low current account deficit is a big support for the government in negotiations with the IMF for another package.

The CAD was reduced to just half a billion dollars in 10 months of FY24, compared to over $4bn during the last fiscal year. Some experts watching the situation closely said the deficit could rise in May and June.

Published in Dawn, May 17th, 2024