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Debt payments dent SBP-held foreign exchange reserves

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  • SBP’s forex reserves decrease by $36 million to $4.2 billion.
  • Reserves enough for less than a month’s worth of imports.
  • IMF funding is critical for Pakistan to shore up its reserves.

The State Bank of Pakistan (SBP)-held foreign exchange reserves fell further as the cash-strapped nation met its debt obligations to avoid a possible default, with the financing avenues contracting amid a stalled International Monetary Fund (IMF) programme.

In its weekly bulletin, the SBP said that its foreign exchange reserves have decreased by $36 million to $4.2 billion as of the week ended March 31, which will provide an import cover of less than a month.

The net forex reserves held by commercial banks stand at $5.51 billion, $1.3 billion more than the SBP, bringing the total liquid foreign exchange reserves of the country to $9.75 billion, the statement mentioned.

Pakistan’s $350 billion economy continues to dwindle amid financial woes and the authorities struggle to strike a staff-level agreement with the IMF.

The Washington-based lender has been in talks with the Pakistani authorities since end-January to resume the $1.1 billion loan tranche held since November, part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.

The IMF funding is critical for Pakistan to unlock other external financing avenues to avert a default on its obligations. 

The IMF has asked Pakistan to secure assurances on external financing from friendly countries and multilateral partners to fund its balance of payment gap for this fiscal year, which ends in June.

In this regard, Saudi Arabia has assured the Washington-based lender that it would provide $2 billion in additional deposits to Pakistan, according to a report published in The News.

The assurance from Saudi Arabia helped the Pakistan rupee recover from a historic low and boosted investors’ confidence in the stock market, sending it above the 40,000 points mark.

Minister for Finance and Revenue Ishaq Dar also held a meeting with US Ambassador to Pakistan Donald Blome, which, according to sources, has assured America’s support for Pakistan to unlock the stalled IMF programme.

However, World Bank and Asian Development have projected Pakistan’s GDP to fall below 1% in the ongoing fiscal year, while warning that the non-completion of the IMF programme, failure to secure financing from key bilateral partners and political instability may result in an eruption of a major macroeconomic crisis.

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ECC Convenes in Islamabad: Forum Sanctions Spa Agreement Between PSO and SOCAR Azerbaijan

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Pakistan State Oil and SOCAR Azerbaijan have signed a sale purchase agreement for the delivery of petroleum products, which has been approved by the Cabinet’s Economic Coordination Committee.

The Finance Minister Muhammad Aurangzeb chaired the ECC meeting in Islamabad, where the permission to this effect was granted.

The Ministry of Energy’s Circular Debt Management Plan for FY 2024–2025 was also authorized by the conference. Its goals are to improve financial sustainability and lower liabilities in the power industry.

The committee examined the situation with the increase in prices for chicken and pulses. In order to offer the general public with relief as soon as possible, it expressed worry about the situation and requested that the National Price Monitoring Committee keep an eye on it in cooperation with the Ministry of National Food Security and Research and the Provincial Administration.

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Pakistan has reduced its policy rate to an all-time high.

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There has been a significant decrease in the policy interest rate that Pakistan has implemented. The country’s central bank made the announcement on Monday that it will be lowering interest rates by 250 basis points, bringing them down to 15 percent. This was a record-breaking reduction in Pakistan’s policy rate, which was done with the intention of bolstering the economy, which had been struggling.

Following a significant decrease in Pakistan’s inflation rate, the central bank made this move. It was anticipated in a poll conducted by Reuters that policy rates would be reduced by 200 basis points. There was a forty percent increase in the country’s inflation rate in May 2023, however it has since decreased to seven point two percent in October. The Ministry of Finance anticipates that inflation will continue to decline, reaching a level of between 5.5 and 6.5 percent in the month of November.

Earlier, Pakistan had reduced the policy rate by 700 basis points over the course of four separate measures beginning in June of last year. The economy of Pakistan has been in a precarious situation for a considerable amount of time. The majority of economists are of the opinion that falling interest rates is essential in order to stimulate economic expansion.

By stating that the existing monetary policy will assist stabilize commodity prices and keep inflation between 5 and 7 percent, the State Bank of Pakistan expressed its support for a reduction in interest rates. In addition to contributing to the preservation of macroeconomic stability, it will also contribute to the achievement of economic growth on a sustainable basis.

Jameel Ahmad, the Governor of the Central Bank, informed analysts at a briefing that Pakistan’s bilateral partner countries have promised the International Monetary Fund (IMF) of continuing support for the duration of their current financial recovery program. This announcement was made in conjunction with the announcement of the policy rate decline.

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The stock market rises to all-time highs and crosses the 92,000-point mark.

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The primary index hit the crucial 92,000-point benchmark as the stock market soared to new all-time highs.

A significant increase was made by the hundred-index, which closed at 92,351 points after rising 414 points.

According to analysts, this increase is the result of a resurgence of investor confidence, which has been supported by strong mood in international markets and solid economic indications.

With predictions for more increase as market stability improves, the most recent surge highlights a robust recovery trend.

The market fell from previous record highs due to selling pressure, causing the Pakistan Stock Exchange to see a steep dip earlier today.

The benchmark 100-index ended the trading session down after originally rising 572 points to an all-time high of 92,514 points.

The market finished the day at 91,660 points, down 278 points, unable to hold the 92,000-point threshold after hitting spectacular highs.

Analysts point to investor profit-taking as a contributing factor in the decline, indicating a cautious attitude in the market following recent advances. The market is becoming more volatile, and investors are paying close attention to patterns.

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