Foreign exchange reserves of Pakistan held by the central bank rose by $276 million to $3.2 billion in the last week. According to the state bank, net foreign reserves lock up by commercial banks remained at $5.5bn. This brings out the total liquid foreign reserves to $8.7bn.
Arif Habib Ltd notified that the current reserves would cover a little more than two weeks to import. Last, week the foreign reserves were lower below RS3bn due to the payment of foreign loans.
The government has imposed new taxes and is in a race to deal with IMF. The agreement of loan program would not only lead to a disbursement of $1.2bn but also unlock inflows from friendly countries. Government had 10 days of talks with the IMF delegation in Islamabad but could not reach a final deal. The IMF finally agreed to stay engaged with the Pakistan government through virtual discussions. This agreement will continue in the coming days to finalize the implementation details of policies discussed in Islamabad.
Meanwhile, the Fitch rating agency has also notified the downgrade of Pakistan’s long-term foreign currency. The default rating IDR to CCC- from CCC+. A CCC minus indicates a high level of default risk due to worsening liquidity, being politically volatile, and a decline in foreign exchange. Fitch explained that the lowering of reserves reflects the further sharp decline in external liquidity and funding conditions. The devaluation of foreign exchange reserves is critically at a low level. Such a decline in foreign exchange was shocking for Pakistan’s economic condition but the current situation seems a little better than before.
In a bailout deal of $7 billion with the IMF Pakistan got agreed to raise the price of electricity and petrol which has released $1.2 billion. The government has added a PKR 3.39 per unit surcharge on the power tariff, in addition to PKR 3.21 raised per unit every quarter. Petrol prices were hiked by RKR 22.20 to up to PKR 272 per liter. Following these measures, the Pakistani Rupee to has gained against the dollar rising to 264.24 for a US dollar on Thursday up from 270.17 on February 13.
