SBP foreign reserves dip to $3.91bn as IMF sticks with harsh conditions

SBP foreign reserves dip to $3.91bn as IMF sticks with harsh conditions


Net amount stands at $9.33bn by adding the greenback held by commercial banks

KARACHI (Web Desk/Reuters) – At a time when the International Monetary Fund (IMF) is pressing Islamabad hard to materialise financing commitments and meet other conditions, the foreign reserves held by the State Bank of Pakistan (SBP) has decreased to $3.91 billion by June 2.

The latest figures released by the central bank, however, show that the net foreign reserves [the total amount with both the SBP and the commercial banks] stood at $9.33bn with the latter’s share of $5.42bn.


It means that the foreign reserves with the SBP witnessed a $179 million dip after some external debt payments from the level of $4.09bn recorded on May 26, representing a decline for the sixth consecutive week.

Earlier on Thursday, Esther Perez Ruiz – IMF resident representative for Pakistan – said that Islamabad had to satisfy the IMF on three counts, before its [IMF] Board would review whether to release at least some of the $2.5 billion still to be disbursed under a lending programme that will expire at the end of this month.

“As communicated to the authorities, there can be one remaining Board meeting under the current EFF [Extended Fund Facility]at end-June,” Ruiz said in an email response to Reuters.

“To pave the way for a final review under the current EFF, it is essential to restore the proper functioning of the FX market, pass a FY24 Budget consistent with programme objectives, and secure firm and credible financing commitments to close the $6 billion gap ahead of the Board,” she added.

Ruiz laid out the IMF’s broad expectations for the upcoming budget. “The focus of discussions over the FY24 budget is to balance the need to strengthen debt sustainability prospects while creating space to increase social spending,” she said.

Read more: Can Pakistan-IMF stalemate see a breakthrough?

The IMF had tasked Pakistan with securing external financing commitments for $6 billion from other sources, but so far it has only obtained commitments for $4 billion, mostly from Saudi Arabia and the United Arab Emirates.

Under pressure to shift to a more market-determined exchange rate regime and shut down an unofficial currency market, Pakistan removed daily limits on fluctuations earlier this year, but analysts suspect that the authorities are still trying to manage the exchange rate, out of fear that the rupee could fall too far.

More such spending would defray the impact of inflationary pressures on Pakistan’s most vulnerable people, Ruiz added, but the government needed to make more progress to identify spending and revenue-generating measures in order to achieve this.

Read more: Pakistan's budget caught between IMF expectations and election

The latest statement comes as analysts says the Shehbaz Sharif-led government hopes to find a balance between reforms to satisfy the IMF and measures to win over voters in an imminent election in its budget for the 2023-24 fiscal year to be announced on Friday.