SBP Reserves Plunge to 20-Month Low Due to External Debt Repayments

The foreign reserves held by the State Bank of Pakistan (SBP) witnessed a staggering outflow of $2.915 billion in the week that ended on March 25, 2022, depicting a 19.5 percent decline on a week-on-week basis. The central bank’s reserves have dropped to their lowest level since June 26, 2020, when they stood at $11.23 billion. The SBP weekly report released on Thursday revealed that the country’s total liquid foreign exchange reserves went down by $2.885 billion (-13.4%) on March 25, 2022, to $18.55 billion, compared to $21.44 billion in the previous week. The SBP reserves decreased by $2.91 billion to $12.05 billion, compared to $14.96 billion a week earlier. Meanwhile, the net foreign reserves held by the commercial banks stood at $6.5 billion, showing an increase of $29.9 million on a weekly basis. This decline reflects repayment of external debt, including repayment of a major syndicated loan facility from China. The rollover of this facility is being processed and is expected shortly. According to reports, China has agreed in principle on granting a fresh rollover of $2.5 billion in commercial loans to Pakistan for one year. Beijing already granted a rollover of a $2 billion loan amount in the recent past. Overall, China has granted a rollover of approximately $4.5 billion in loans to help Islamabad manage its external sector vulnerabilities. Foreign Minister, Shah Mehmood Qureshi has currently been on a visit to China. In his video message, he confirmed that China had agreed in principle to roll over loans for which Pakistani authorities made a fresh request. Now, both sides are working out the details and an announcement will be made soon after the completion of procedural requirements.