According to data released by the State Bank of Pakistan (SBP), the foreign exchange reserves of the country went up to a record level of $24.4 billion by the week ending on July 2.
Total liquid foreign #reserves held by the country stood at US$ 24.41 billion as of July 02, 2021. For details: https://t.co/WpSgomnd3v pic.twitter.com/gSyg6TwNHD
— SBP (@StateBank_Pak) July 9, 2021
The SBP received $1 billion as government of Pakistan loan disbursement from China and $440 million from World Bank. After accounting for external debt repayments and other official payments, the SBP’s reserves rose by $1.112 billion to $17.231 billion at the end of last week, up from $16.119 billion a week earlier.
During the last week, foreign currency reserves held by the commercial banks also slightly increased by $5.8 million to $7.183 billion, revealed the State Bank.
Pakistan had received a number of foreign inflows during FY21 which included $2.5 billion proceeds against Eurobond issuance. A multi-tranche transaction of 5-, 10- and 30-year Eurobonds was conducted to build up the foreign exchange reserves.
During June-2021, Pakistan also received proceeds of Wapda Green Eurobond worth $499.0 million. All these inflows helped to build the foreign exchange reserves.
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Moreover, in the last week of March, Pakistan received around $500 million from the International Monetary Fund (IMF) as a loan tranche under Extended Fund Facility (EFF) for budget support.
A significant improvement in the current account position, during the last fiscal year, also contributed to build up the foreign exchange reserves.
According to financial analysts, it is necessary to increase the level of country’s foreign exchange reserves in order to ensure external debt sustainability. Now that these inflows have build-up the country’s foreign exchange reserves, it would help in smoothly paying off the debt obligations in the
It would also help limit any vulnerability during a crisis when there is a sudden disruption in foreign capital flows. Therefore, it is necessary for Pakistan to keep on working to increase these foreign reserves as they provide a cushion against unforeseen crisis and provide confidence that there would still be enough forex to support the country’s crucial imports in case of external shocks.