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Reserves begin to fall after six weeks on the rise

KARACHI: The central bank’s foreign exchange reserves fell for the first time in six weeks, falling by $354 million during the week ending March 24, according to data released on Thursday.

Meanwhile, amid a stalemate in bailout talks with the International Monetary Fund, China is working on a request from cash-strapped Pakistan to roll over a $2 billion loan that matured last week, a top finance ministry official told Reuters (IMF).

The State Bank of Pakistan (SBP) reported that reserves had fallen due to external debt repayment and were now at $4.24 billion, almost back to where they were at the start of the month. During the week, commercial banks’ reserves increased by $31 million to $5.57 billion.

However, with the latest drop in SBP holdings, the country’s total liquid reserves have returned to the sub-$10 billion range.

Only last week, the reserves increased to $4.6 billion due to a $500 million Chinese inflow.

The government is awaiting the rollover of a $2 billion Chinese loan.

The government has been working hard to improve its reserves position, which is the primary impediment to convincing the IMF to restart a loan program. Despite avoiding default, the country has been unable to make important payments. The real source of concern for both the country and the IMF is Pakistan’s external payments (primarily debt servicing).

So far, the government has been unable to persuade its Middle Eastern friends to lend money, while the IMF has maintained that it will not release a $1.1 billion tranche unless Pakistan arranges the $6 billion required to service debt in the current fiscal year.

At this point, a Chinese debt rollover would be critical for Pakistan. “It is a work in progress,” the official said in a text message to Reuters on Wednesday, referring to the Chinese loan rollover, which matured on March 23. “Formal documentation is being prepared.”

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