Jameel Ahmad, governor of the State Bank of Pakistan (SBP), said on Thursday that all debt repayments are on schedule. He also said that the country’s foreign exchange reserves are expected to grow in the second half of the current fiscal year.
The governor disclosed in the most recent episode of the SBP podcast series that two foreign commercial banks had also received repayments for separate loans totaling $1.2 billion. He stated that the banks had agreed to return the money, but he did not provide a time frame.
He talked about the country’s ability to meet its international financial obligations and external account vulnerabilities in the podcast.
He said, for the monetary year 2023, around $33 billion were to be reimbursed to outside partners, including the ongoing record shortfall of $10 billion and $23 billion in credit reimbursements.
Pakistan has already paid back more than $6 billion of its $23 billion external debt, and a bilateral loan of $4 billion has been rolled over with the help of relevant nations.
Ahmad stated that discussions are currently underway, and that additional maturing obligations totaling $8.3 billion are anticipated to be rolled over. He also stated that the amount of outstanding repayment for the remainder of this fiscal year is approximately $4.7 billion.
This includes $3.6 billion in multilateral loans and $1.1 billion in commercial loans that must be paid back to foreign banks.
‘SBP has enough reserves’
The SBP chief said that Pakistan has received $4 billion in foreign exchange inflows (excluding $4 billion in rollovers) and that Islamabad will continue to pay its loans on time. Inflows are expected to rise significantly in the second half of this fiscal year.
He maintained, “Pakistan’s foreign exchange reserves are expected to significantly increase in the coming months, along with the rollover of some external obligations.”
After receiving $500 million from the Asian Infrastructure Investment Bank (AIIB), SBP reserves reached $7.9 billion during the week of November 28 to December 2.
All debt repayments are on track and country's foreign exchange reserves are expected to rise in second half of fiscal year; says Governor #SBP Mr. Jameel Ahmad in an exclusive #SBPPodcast. Watch full: https://t.co/5ICLUu4iSr pic.twitter.com/TudoeE65Bq
— SBP (@StateBank_Pak) December 8, 2022
SBP repaid some external debt and the maturing Pakistan International Sukuk for $1,000 million during the week under review. As a result, Pakistan’s foreign exchange reserves peaked on December 2, 2022 at $6.7 billion.
The central bank had paid back two $1.2 billion commercial loans earlier. In the coming days, these banks are expected to refinance the same amount, contributing to the expansion of the nation’s foreign exchange reserves.
He mentioned that “the government is also in talks with a friendly country for the disbursement of a $3 billion loan” and that “negotiations are progressing with multilateral agencies for further financial support”
He went on to say that only a small portion of Pakistan’s debt is owed to foreign banks, and that Pakistan’s debt profile is made up of bilateral and multilateral creditors.
According to him, “The SBP has enough reserves to repay all obligations in an effective manner,” and “the inflows expected will boost forex reserves,” he disputed reports from various brokerage houses that Pakistan only has a one-month import.
‘Situation is challenging’
Ahmad identified the following global problems as major obstacles:
- War in Ukraine
- Historic increase in the international commodity prices
- Monetary tightening pursued by central banks
He said, “As a result, developing countries, including Pakistan, are facing difficulties in raising funds from international financial markets.” He also said that floods have had a negative impact on the economy at home, which has caused problems.
“The situation is difficult overall; However, the government and SBP are working to improve it, he assured the public.
He explained that SBP had predicted that the current account deficit for FY23 would be $10 billion at the beginning of the year. However, Pakistan’s historic floods had led to expectations of an increase in imports, particularly of wheat, fertilizer, and cotton.
“Along with this, the floods affected the country’s exportable crops, and it was anticipated that Pakistan’s current account deficit would increase by $2 to $3 billion.”
‘Import restrictions to withdrawn gradually’
During the podcast, Ahmad stated that there have been significant changes on the international market, including a decrease in the cost of petroleum products. In the meantime, SBP has also implemented policy measures that will significantly reduce some outflows.
He continued, “It is expected that the current account deficit will remain below $10 billion for FY23” as a result of these policy interventions and other measures.
He recalled that the SBP and government took some administrative steps in the final quarter of fiscal year 2022-23 to reduce imports and improve the external accounts position.
He stated, “The SBP placed restrictions on imports […] these restrictions covered about 15% of Pakistan’s total imports, but 85% of imports have not been restricted.”
After that, SBP and the government identified eight to ten genuinely affected and in need of relief business sectors. From January to June 2022, they were permitted to import 50% to 60% of their monthly average import payments.
In a similar vein, a few importers mentioned instances of demurrages in which import-related letters of credit were opened prior to the issuance of SBP restrictions. The issue was resolved by the central bank in collaboration with commercial banks, and the payment holdup was cleared.
Moreover, a few relaxations were likewise given after interview with industry, he said, adding that thusly, under 10% of the nation’s imports are at present dependent upon regulatory controls. ” All such limitations are brief and will be removed bit by bit,” he guaranteed.
The SBP governor stated that petroleum and pharmaceuticals are among SBP’s priority sectors, and he added that there are no import restrictions on petroleum products, pharmaceutical raw materials, or inputs.
He stated that the SBP is aware that import administrative measures must gradually be relaxed rather than continued. The bank might look at them starting next year and make things easier for businesses, he said.
Source: Geo.tv
