Forex reserves surge by $190 million

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KARACHI: Pakistan’s foreign exchange reserves rose by $190 million as of May 24 after implementation of the currency swap agreement with China to boost trade, spokesman for the central bank said on Thursday.



The forex reserves of the country witnessed a modest increase despite a large debt repayment of $385 million made by the State Bank of Pakistan (SBP) to the International Monetary Fund (IMF) on the same day, the central bank said.


The country’s forex reserves increased to $11.6 billion during the week ended on May 24 from $11.4 billion in the previous week. The reserves of the State Bank soared by $182 million to $6.564 billion from $6.382 billion a week ago.


“The surge in the forex reserves is the reflection of an initiative taken by the State Bank under the currency swap agreement with the People’s Bank of China, which was implemented from May 7,” the spokesman said.


Analysts said that it is not the real cause of increase as the transactions made under CSA are usually not reflected on the overall foreign exchange holdings of the country and the State Bank of Pakistan.


Usually, the central bank holds foreign assets in different currencies and converted it in dollars, they added.


Pakistan paid 258.425 million special drawing rights (SDR), or $385.6 million, against the principal amount of the IMF loan on May 24, under the standby arrangement programme.


Pakistan is in dire need of building up foreign exchange reserves for the financing of the current account and fiscal deficits.


Pakistan is scheduled to pay 8.614 SDR under the extended credit facility (ECF) and 95.837 SDR against the standby arrangement on June 28, respectively.


Pakistan has paid a total of $582.68 million worth of debt to the IMF just in a single month of May.


Pakistan is also scheduled to pay debt repayments of around 700 million SDR to the IMF in June and August.


Under the currency swap agreement, Pakistani importers will settle their letter of credits in the rupee instead of dollars in the Chinese banks.


The SBP said the currency swap agreement between the two central banks will give a positive signal to the market on the availability of liquidity of other country’s currency in the onshore market.


The arrangement will augment the pool of liquidity available to finance bilateral trade between the two countries, supplementing the already available sources of liquidity, it said.


The objective of the currency swap arrangement is to promote bilateral trade and investment between the two countries in the local currencies.

Courtesy:  The News

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