In a promising turn of events, the State Bank of Pakistan (SBP) reported a $25 million increase in its foreign exchange reserves, reaching $8.006 billion by April 26th.
While the specific sources of this influx remain undisclosed by the central bank, industry analysts speculate that the SBP’s strategy likely involved purchasing dollars from the interbank market to fortify its reserves against potential declines.
Earlier in April, the SBP settled $1 billion against the maturity of Eurobonds without a reported decline in reserves, indicating proactive measures to manage payments by sourcing from the interbank market.
Further reinforcing the country’s financial position, the State Bank received $1.1 billion from the International Monetary Fund (IMF) under the Stand-By Arrangement, anticipated to reflect in forthcoming reserve figures.
The bolstered reserves have not only stabilized the exchange rate but have also instilled confidence in Pakistan’s ability to meet its external repayment obligations promptly.
This stability has attracted heightened interest from foreign investors, with $20.6 million injected into the economy in April alone, including a substantial $183.6 million invested in treasury bills during FY24. This renewed investor confidence marks a significant departure from the tepid interest observed in domestic bonds post-2019 pandemic.
Despite this positive trajectory, concerns persist regarding the country’s ability to issue fresh Eurobonds due to lingering perceptions of its external economic standing.
In a bid to test its financial standing, the government is exploring the possibility of issuing $300 million Panda bonds, leveraging the Chinese market for potential fundraising. Successful issuance could pave the way for further international borrowing endeavors.
Finance Minister Mohammad Aurangzeb has expressed optimism, projecting SBP’s foreign exchange reserves to range between $10 and $11 billion by the end of the current fiscal year.
With the SBP reporting overall reserves of $13.136 billion, including $5.310 billion held by commercial banks, Pakistan’s economic landscape exhibits signs of resilience and cautious optimism amidst global uncertainties.
Published in Dawn, May 3rd, 2024
