Declining reserves

PAKISTAN’S foreign exchange reserves have dropped to a nearly four-year low of $6.7bn — just about enough to cover four to five weeks of imports, according to the State Bank’s numbers released on Thursday. The same day, the SBP governor, Jameel Ahmad, said in a podcast that all debt repayments are on track and foreign exchange reserves are expected to increase in the second half of the current fiscal as he spoke of Pakistan’s capacity to meet its international financial obligations. The aim was to address widespread market concerns over external account vulnerabilities. With net foreign reserves held by commercial banks at $5.87bn, Pakistan’s total liquid foreign reserves are now nearly $12.6bn. The SBP attributed the drop to the $1bn payment it made against the maturity of Sukuk bonds. The SBP chief gave details of Pakistan’s financing needs for the current fiscal, the loan amounts rolled over by China and Saudi Arabia, debt repayments, likely dollar inflows from bilateral and commercial creditors, etc. In short, he tried to reassure the markets that Pakistan no longer faces the risk of default. True, if everything goes according to the SBP script we will meet our external debt repayment obligations this year. But, what happens in the next fiscal and after?