Reserves drop after six weeks on the rise

The central bank’s foreign exchange reserves dropped for the first time in six weeks, shrinking by some $354 million during the week that ended on March 24, it said on Thursday. Meanwhile, China is working on a request from cash-strapped Pakistan to roll over a $2 billion loan that matured last week, a top finance ministry official told Reuters, amid a stalemate in bailout talks with the International Monetary Fund (IMF). The State Bank of Pakistan (SBP) said the reserves fell because of external debt repayment and stood at $4.24 billion — almost near where they were at the beginning of the month. Reserves held by commercial banks rose by $31m to $5.57bn during the week. However, with the latest fall in SBP’s holdings, the country’s total liquid reserves are back at the sub-$10bn level. Only last week, the reserves had increased to $4.6bn on the back of a $500m Chinese inflow.The government has been struggling to improve its reserves position, which is the main obstacle in convincing the IMF to resume a loan programme. Though the country has avoided default, it has been unable to make payments for imports. Pakistan’s external payments (mostly debt servicing) is the real cause of concern for both the country and the IMF.