KARACHI: Governor State Bank of Pakistan (SBP) Jameel Ahmad on Monday said that the country has enough dollars in its coffers to meet foreign debt obligations.
“There is no need to be concerned about a lack of foreign exchange liquidity,” Mr. Ahmad told the press after a ceremony at the Institute of Business Administration (IBA). “We have almost $7.9 billion in reserves. They’re more than enough to fulfil any commitments, the governor declared.”
Due to the servicing of external debt, including a $500 million commercial loan repayment to China, the SBP’s foreign exchange reserves decreased by $956 million during the week ending on November 4.
The SBP governor’s statement coincided with Pakistan’s risk of sovereign default hitting a multi-year high at the end of last week.
A kind of insurance against the danger of sovereign default, the country’s five-year credit default swap (CDS) surged by over four percentage points on a daily basis to 64.2% on Nov. 11.
Investors’ decreasing confidence in Pakistan’s capacity to repay its international loans is reflected in the growing CDS level.
The five-year CDS increased monthly by 4,210 basis points, or 42.1 percentage points, to 6,419 basis points, according to Arif Habib Ltd.
All letters of credit (LCs) totaling less than $100,000, according to Mr. Ahmad, will be cleared by this week’s end. Due to the recent restrictions on the outflow of foreign exchange, many businesses, especially those that serve the domestic market for goods, were unable to make dollar-denominated payments to their foreign suppliers.
“We’re also facilitating (imports for) export-oriented projects. There’re some businesses whose projects are nearing completion. We’ve cleared their imports. Moreover, for some specific sectors, we’re allowing the equivalent of 50-60pc of their past imports,” said Mr Ahmad without elaborating further.
With regard to the ongoing investigation into the alleged manipulation of the exchange rate by more than eight commercial banks, the SBP governor said the central bank’s team looking into the matter will complete its task by the end of November. “We’ll then take all the required regulatory actions,” he said.
