By Shahid Iqbal
Published in Dawn on November 05, 2024
KARACHI: Higher foreign inflows are expected this month as the remittances crossed $3 billion in October, while the State Bank of Pakistan (SBP) expects $500 million from the Asian Development Bank (ADB) this week.
In a briefing with the analysts and researchers after the announcement of the monetary policy on Monday, SBP Governor Jameel Ahmed disclosed that the remittances in October had crossed the $3bn mark, which would help build the foreign exchange reserves as projected.
The first quarter FY25 remittances are already higher by 39 per cent. The government has projected to increase the SBP foreign exchange reserves to $13bn by the end of FY25.
The governor also disclosed that the $500m would be received from the ADB within a week, further boosting reserves. With this inflow, the SBP reserves would reach $11.7bn. As of Oct 25, the foreign exchange holdings of the central bank rose to $11.2bn, following an inflow of $116m.
Says receipt of $500m from ADB expected this week
Mr Jameel told the analysts that out of the $26bn required for debt servicing in FY25, Pakistan has already paid $5.7bn. He hoped $14.1bn would be rolled over during the fiscal year. Despite this expected rollover, Pakistan needs $6.3bn for debt servicing. The country will have to arrange for repayment of this amount.
In the near future, launching Euro and Panda bonds to raise dollars seems a remote possibility due to poor ratings. However, the SBP governor did not elaborate on the sources from where the remaining $6.3bn would be arranged for debt servicing.
Pakistan may borrow from the international banking market to meet its debt repayment obligations at high interest rates.
The SBP governor also said the government is trying to improve its domestic debt profile and may borrow less than the earlier projected amount. He said the government is discouraging short-term treasury bills (T-bills) for domestic borrowing.
The governor said the T-bills accounted for 21pc of the domestic debts one year back, which would now be 20pc since the government has been borrowing for a longer tenure. The government twice went for a buyback of short-term T-bills during a couple of months. He said the interest payment would be reduced to Rs8.3-Rs8.4tr against the earlier projection of Rs9.5tr for FY25.
The governor said the current account would remain surplus in October, like in August and September. The surplus is a great relief for the government struggling to manage external debt servicing and stay within the expectations of the IMF. The country is under the IMF programme and has been trying to meet the conditions attached to the new $7bn Extended Fund Facility.
