Reports from local media suggest that Pakistan is facing tension in its foreign exchange market due to anticipated higher dollar outflows. The State Bank of Pakistan (SBP) is currently under pressure to arrange $1.8 billion for the repayment of a Chinese loan due in March, according to Dawn.
Sources from the finance ministry revealed that the Ministry of Finance has not yet provided the equivalent local currency amounting to $1.8 billion to the State Bank for the payment to China. Despite increased outflows of profits and dividends on foreign investments during the first seven months of the current fiscal year, the pending amount exceeds the repatriated sum.
While some local currency, approximately equivalent to $800 million, has been allocated, the Pakistan central bank hesitates to repatriate this amount, as per Dawn's report. The SBP is striving to uphold its foreign exchange reserves above $8 billion to ensure stability in the exchange rate. However, multiple repayments are queued for debt servicing, profit outflows, and other dues.
Although the current account deficit for the first seven months of FY24 stood at $1 billion compared to $3.8 billion in the same period last year, experts in the financial sector warn that rising imports could potentially widen the deficit significantly by the end of the fiscal year on June 30.
Financial analysts highlight Pakistan's limited options in raising dollars, with reliance primarily on sources like the International Monetary Fund (IMF) and other lending agencies. However, they caution that persuading lenders for additional loans may prove challenging, as reported by Dawn.
Read also | Adani's Record Profit Growth Paves the Way for Unmatched Green Investments
