After Saudi, UAE Financial Boost, Pakistan’s Foreign Exchange Increases by 22%

According to weekly data released by the State Bank of Pakistan, the foreign exchange reserves held by Pakistan’s central bank increased 22.88%, crossing the 8 billion dollar mark.

Earlier, the reserves fell to 6,636.1 million dollars which raised attention towards Pakistan’s ability to cope up with its financing requirements. Nevertheless, the first tranche of 1 billion dollars from the United Arab Emirates (UAE) and the last tranche of 1billion dollars from Saudi Arabia helped in stabilising the balance of payments by pushing the reserves above 8 billion dollars.

Further, China and the UAE have agreed to provide a good amount to support the fast depleting reserves. The foreign currency reserves held by State Bank of Pakistan recorded at 8,154.3 million dollars on January 25, marked increment of 1,518.2 million dollars compared with the previous week’s reserve valued at 6, 536.1million dollars.

The Increment was recorded as a result of 1,000 million dollars of cash inflows from Saudi Arabia and the UAE. The State Bank of Pakistan’s reserves increased 1,518 million dollars, after settling the outflows related to external debt and other official payments.

Overall, the liquid foreign currency reserves, held by the country, including net reserves held by banks other than the SBP, stood at $14,802.5 million. Net reserves held by banks amounted to $6,648.2 million.

The Chinese Embassy Deputy Head of Mission Zhao Lijian assured Pakistan of a financial package to boost its flagging foreign currency reserves, indicating that it would be bigger than that promised by Saudi Arabia.

China also agreed to directly give a loan of $2 billion to Pakistan to provide much-needed help to the new government.

In past, the reserves drained to $9.06 billion, forcing the central bank to let the rupee depreciate massively for the fourth time since December 2017 and raising concern about the country’s ability to finance a massive import bill as well as meet debt commitments in coming months.

In April, the State Bank of Pakistan’s reserves increased $593 million due to official inflows. A few months ago, the reserves grew due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The bank also received $350 million under the Coalition Support Fund (CSF).

In January last year, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.

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