KARACHI: The US dollar gained strength in the interbank market as the State Bank’s reserves slightly decreased, despite growing hopes for more inflows and a fresh IMF rescue package.
Currently requesting another loan package from the International Monetary Fund in Washington is a financial delegation headed by Finance Minister Muhammad Aurangzeb.
The minister expressed optimism prior to leaving for the negotiations, but these developments were not well received by the market. The dollar gained 18 paise to Rs278.12 on Monday. In the open market, the value of the US dollar increased by 29 paisas to Rs279.66.
Experts on currencies argue that the market is influenced by concrete facts and stress that positive news alone will not change market attitudes; genuine dollar inflows are necessary.
Reserves at State Bank show a minor decrease.
The currency market is rife with dissatisfaction over the nation’s mounting foreign debt and associated servicing obligations. Experts believe there is little chance of Pakistan escaping the heavy debt servicing requirements that are eating up a sizable amount of its export revenue.
Senior banker comments suggest that it is unlikely to avoid servicing the $25 billion debt in FY25, given the need for additional borrowing to cover obligations.
The State Bank of Pakistan (SBP) spent $1 billion last week to pay down maturing Eurobonds, which reduced the bank’s already meager reserves.
The $1 billion Eurobond payment was not included in the State Bank’s foreign exchange reserves, which it said on Monday showed a slight decline of $0.1 million to $8.040 billion for the week ending on April 5. Currency analysts calculate that after payment, the actual reserves will be close to $7 billion.
However, as it has been doing to keep reserves at a targeted level of $9 billion by the end of this fiscal year under the IMF Standby Arrangement, the SBP plans to strengthen reserves by buying dollars from the interbank market.
While a high-ranking Saudi team is in Pakistan right now, Islamabad is counting on the kingdom to spend $5 billion in a number of Pakistani sectors.
$3 billion in remittances and more than $82 million in Treasury notes were received in March, which was a noteworthy increase after four years. Bankers warn that the decreasing returns could cause this trend in T-bill inflows to reverse.
T-bill return rates are currently about 21%, which is regarded as a high level. Investors have been attracted to enter the market by steady exchange rates over the previous three months.
The State Bank stated that as of the week that concluded on April 5, the nation’s total reserves were $13.441 billion, of which $5.4 billion was held by commercial banks.
