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Foreign exchange reserves cross $25b benchmark due to massive borrowing

  • July 24, 2021

ISLAMABAD – Pakistan’s foreign exchange reserves have gone beyond $25 billion benchmark mainly due to the massive borrowing from the external sources.

The total liquid foreign reserves held by the country stood at $25.128 billion. Foreign reserves held by the State Bank of Pakistan are $18.050 billion and net foreign reserves held by commercial banks are $7.077 billion. “During the week ended 16-Jul-2021, SBP received proceeds of $1,040.8 million against Pakistan Euro Bonds. After accounting for external debt repayments, reserves increased by $845.0 million to $18,050.7 million,” the State Bank of Pakistan said on Friday.

The government is continuously borrowing from the external sources to repay the previous loans and to maintain the foreign exchange reserves of the country. On the other hand, the current account also remained in surplus in 11 months of the last financial year, which helped in maintaining the country’s foreign exchange reserves.

Pakistan’s current account recorded a deficit of $1.85 billion in fiscal year 2020-21 owing to a jump in imports on account of rise in crude oil prices and vaccine arrivals. The deficit came despite the fact that the current account remained in surplus in the first 11 months (July 2020 to May 2021) of the previous fiscal year. In just last fiscal year 2020-21, the government had taken foreign loan of $14.282 billion from international lenders. In the fiscal year 2019-20, the external inflows were $10.662 billion. Only in the month of June 2021, the country had received $2.115 billion external inflows from multiple financing sources including $1.112 billion (53 percent) from foreign commercial banks.

The breakup of loan of $14.282 billion showed that Pakistan had received $4.721 billion from foreign commercial banks (33 percent) in previous financial year. Among commercial banks, the government had taken $323.62 million from Ajman Bank, $712.52 million from the Standard Chartered Bank (London) including $112.51 million in June, $815.11 million from Dubai Bank, $200 million were received from the consortium-led by Suisse AG, UBL, and ABL, $370 million from Emirates NBD, $1.3 billion from the ICBC, China, and $1 billion from China Development Bank, which were received in June 2021.

According to the latest data of Ministry of Economic Affairs, Pakistan has received $4.823 billion from the bilateral and multilateral development partners during the period under review (July-June) 2020-21 against the budgeted estimate of $5.811 billion for 2020-21. Among the multilateral development partners, the Asian Development Bank provided $1.368 billion against the budgeted estimates of $1.470 billion followed by the World Bank’s $2.035 billion against the budgeted estimate of $2.257 billion and Asian Infrastructure Investment Bank (AIIB) $252.11 million. Meanwhile, among bilateral sources, France, the USA, and China provided $41.53 million, $108.48 million, and $203.92 million, respectively. Pakistan had received $2.5 billion from bonds issuance, while $1 billion was received as safe deposits from China. The government had budgeted $1 billion under the head of Saudi oil facility; however, no amount was received during the fiscal year 2020-21.

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