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Total liquid foreign reserves held by the State Bank of Pakistan (SBP) declined by a further $294 million to $5.821 billion on Thursday, leaving the country with just enough funds for 5-6 weeks’ worth of imports.
According to data issued by the central bank, this is the lowest value of foreign exchange reserves since 2014. It said that for the week ending Dec. 23, the total liquid foreign reserves held by the country stood at $11.71 billion, including the $5.885 billion held by commercial banks.
There has been growing concern over Pakistan’s ability to finance its external liabilities, including debt obligations and a spiraling current account deficit, with observers warning that the country is on the brink of default. Finance Minister Ishaq Dar has repeatedly denied this, while acknowledging that the country is in a “tight” fiscal position. He has also claimed that the government is securing support from “friendly” nations, but this has yet to materialize even as the country’s efforts to revive a bailout with the International Monetary Fund (IMF) are at an impasse as the global lender is demanding Islamabad fulfill previously agreed-upon conditions that risk inflicting even more inflation prior to completing the pending 9th review.
Adding to the concerns is the funds required by Pakistan to meet all its external debt servicing obligations. At the launch of the ongoing fiscal year, this sum stood at $23 billion, of which $6 billion has been repaid and $4 billion rolled over, leaving $13 billion still pending. Of this, roughly $8 billion must be repaid within the first three months of 2023, some of which the government hopes to get rolled over.
Despite this, the central bank earlier this week announced an easing of import restrictions imposed to curtail foreign spending, potentially paving the way for a higher import bill in the coming months that could have a significant impact on the already-depleting reserves.
Obligations will be met
Seeking to allay concerns, Minister of State for Finance Aisha Ghaus Pasha on Thursday assured journalists that there is “no chance” of Pakistan defaulting and the government would fulfill all its obligations per schedule. Reiterating that talks were underway to secure a $3 billion loan from Saudi Arabia as well as other “friendly” nations, she said the finance minister also planned to meet officials of the IMF on the sidelines of an international donors’ conference in Geneva on Jan. 9.
The donors’ conference is aimed at convincing global donors to help fund the repair and rehabilitation of damages caused by this year’s devastating floods, which have caused damages worth $30 billion.