Miftah says SBP reserves will drop below $2bn by September end

The economic situation is going to be “very difficult” in coming months, with liquid foreign exchange reserves of the central bank likely to drop below the critical level of $2 billion by the end of September, said former finance minister Miftah Ismail on Wednesday. Addressing a meeting of businesspeople at the German consulate, the estranged PML-N leader who served two brief stints as finance minister said the ongoing economic crisis is “not like the old recessions we had”. With the $7bn International Monetary Fund (IMF) loan programme in abeyance for months on end, the central bank’s liquid foreign exchange reserves have dropped to $4.4bn. According to Mr Ismail, Pakistan has to pay $3.7bn in amortisation debt repayment and $400 million in interest payments within the next two months. In other words, the outflow of dollars in terms of external loan-related payments amounts to $4.1bn while the total reserves of the State Bank of Pakistan (SBP) stand at only $4.4bn. Of the $4.1bn figure, $1bn is a safe deposit from China, meaning it’s the money that the Chinese central bank has deposited with the SBP. China will likely re-roll it, bringing the total expected outflow to $3.1bn. Islamabad owes another $1.5bn to two Chinese banks, which may also re-roll the sum but the process will take time, he added.