ISLAMABAD    -    Pakistan’s foreign exchange reserves tumbled by over one billion dollars in last week mainly due to the repayment against Pakistan Sovereign Bond.

Pakistan’s foreign exchange reserves have declined by $1.03 billion to $16.2 billion during previous week. The reserves held by the State Bank of Pakistan (SBP) stood at $9.24 billion whereas reserves of the commercial banks are $6.95 billion. 

“During the week ending 12th April, SBP’s reserves decreased by $1,028 million to $9,243.7 million, due to payments on account of external debt servicing, including principal repayment of $1,000 million against Pakistan Sovereign Bond,” the SBP said on Thursday.

Pakistan had launched $2 billion bond on April 9, 2014 out of which $1 billion was generated on five-year note at a yield of 7.25 percent and another $1 billion for a period of 10 years at the rate of 8.25 percent. Meanwhile, the government would have to further repay $3.09 billion in terms of principal and mark-up on foreign loans during ongoing month apart from the aforesaid Pakistan Sovereign Bond.

These heavy repayments would reduce foreign exchange reserves, which were built with the help of loans from the friendly countries.

The country’s foreign exchange reserves held by the central bank had recently gone to $10.7 billion after getting loans from Saudi Arabia, United Arab Emirates (UAE) and China. The reserves are coming under pressure in next few months due to heavy repayments.

However, the Pakistan and International Monetary Fund (IMF) have agreed on three years loan programme in principle that would also pave way to receive loans from other multilateral institutions like World Bank (WB) and Asian Development Bank (ADB). Pakistan would borrow up to $8 billion from the IMF. Pakistan would also receive loans from WB and ADB after finalizing the deal with the IMF.

The WB would disburse $7 billion loan to Pakistan in next few years while the country would also receive loans from the ADB and IFC. He also announced that Pakistan would also issue bonds in the international market. All these loans would help in building the country’s foreign exchange reserves.

The incumbent government, after making hectic efforts, succeeded in arranging financing to avert the balance of payment crisis. Prime Minister Imran Khan had visited friendly countries like China, UAE and Saudi Arabia for requesting to provide loans. However, the reserves, which had increased to $10.7 billion, would come under pressure during the last quarter of the ongoing fiscal year.

Pakistan was facing a financing gap of $12 billion after taking into account all projections of dollar inflows during the current fiscal year 2018-19. Pakistan had already received three billion dollars from Saudi Arabia. Meanwhile, the deferred oil payment facility is also in the pipeline, which would reduce the pressure on the imports of the country.

The UAE had so far deposited $2 billion in SBP’s account since January 2019. The official said that Pakistan would receive remaining one billion dollar from UAE this month. China has deposited $2.1 billion (RMB 15 billion) in State Bank of Pakistan (SBP)’s account to jack up the foreign currency reserves.