Govt looking at friendly countries for deposits amid foreign reserves crunch

• Riyadh "studying" prospect of further deposits to Pakistan: sources.
• UAE rolled over $2 billion, $1 billion additional deposit still doubtful.
• Foreign reserves down by $12.3bn in last 12 months: SBP data.

ISLAMABAD: The government is mulling approaching friendly countries, especially Saudi Arabia, for additional deposits on an immediate basis in  a bid to bridge financing until things are finalised with the International Monetary Fund (IMF), sources told The News. 

Government sources said that Saudi authorities are "studying" the prospect of further deposits to Pakistan amid the foreign exchange reserves crunch. A senior official at the Finance Ministry said that the uncertain political situation was impeding the decision-making process, making it difficult for policymakers to make hard choices needed for the revival of the IMF programme.

Official sources told the publication that the government does not have much time to act as foreign exchange reserves held by the State Bank of Pakistan (SBP) are depleting at a rapid pace. As of January 6, the foreign exchange reserves held by the SBP stood at just $4.3 billion.

Commercial banks' foreign currency reserves stood at $5.8 billion, taking the country's cumulative reserves to around $10.18 billion. SBP's reserves have dropped by $12.3 billion in the last 12 months; from $16.6 billion on January 22, 2022, to $4.3 billion on January 6, 2023.

Experts say there is a lack of understanding on moving ahead; the situation has reached a point where only action with a clear-cut vision can avert the crisis. There is no time of luxury of months, so there is a need for immediate action, they added.

A few days back, Prime Minister Shehbaz Sharif hinted that the IMF review mission might visit Pakistan, but it is yet to happen. Sources said the PM requested the IMF MD to send a review mission and she replied, “let’s consider it.” However, the Pakistani authorities misunderstood that the IMF would send its mission without confirmation from the donor agency.

Sources said that the government's strategy to get dollar inflows from friendly countries and utilise them as bridge financing until the IMF programme is revived has so far failed.

Although friendly countries, like Saudi Arabia, have been studying the possibility of an additional $2 billion deposit, it is not yet clear how much time they will take to make the decision. The KSA had signed a $1 billion oil facility on deferred payment, which will resume next month (February 2023). The United Arab Emirates (UAE) agreed to roll over $2 billion in existing deposits but nothing specific about the additional $1 billion deposit request was mentioned in a joint statement issued at the conclusion of the PM’s visit to the country.

The IMF's review mission's visit is not yet confirmed due to the government's inability to take unpopular decisions, including hiking gas and electricity tariffs and taking additional taxation measures. The tough measures taken by the government could only pave the way for the completion of the pending 9th Review under the Extended Fund Facility (EFF).