The foreign exchange reserves of the central bank decreased for the first time in six weeks, falling by almost $354 million for the week ending March 24, it was announced on Thursday.
In the midst of a deadlock in bailout negotiations with the International Monetary Fund, 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 (IMF).
The reserves dropped due to the repayment of foreign debt, according to the State Bank of Pakistan (SBP), and were now at $4.24 billion, which is practically back to where they were at the beginning of the month. Throughout the week, commercial banks’ reserves increased by $31 million to $5.57 billion.
Yet, as a result of the most recent decrease in SBP’s holdings, the nation’s total liquid reserves are once again below the $10 billion mark.
The major barrier to persuading the IMF to restart a loan programme is the government’s ongoing struggle to strengthen its reserve position. The nation has been unable to pay for imports, while avoiding default. The primary source of worry for Pakistan and the IMF is its foreign payments, which are mostly used to service its debt.
The government has so far been unsuccessful in convincing its Middle Eastern allies to lend money, and the International Monetary Fund has remained steadfast in its position that it won’t release a $1.1 billion tranche until Pakistan has secured the $6 billion needed to pay off debt in the current fiscal year.
At this point, Pakistan would need China to roll over its debt. In a text message to Reuters on Wednesday, the official described the rollover of the Chinese loan, which was due on March 23, as “a work in progress.” The formal documentation process has begun.