A $1.5 billion dollar loan received Pakistan.
To offset the depreciation of the rupee, the funding increased foreign exchange reserves to $9 billion.
KARACHI: Pakistan obtained a $1.5 billion loan from the Asian Development Bank (ADB), boosting the country’s declining foreign exchange reserves, which on Wednesday hit $9 billion.
However, despite the increasing political commotion, the development did not help the rupee versus the US currency.
In the interbank market, the local currency reversed course and fell 0.43% (or Rs0.95) to close at Rs220.68 to the dollar.
That put an end to the rupee’s winning streak of the previous three straight working days, during which it had gained 0.54% (or Rs1.18).
According to experts, it would continue to fluctuate between Rs215-220 versus the US dollar in the near future.
Ishaq Dar, Pakistan’s finance minister, said on Twitter that the Asian Development Bank had issued $1.5 billion under the BRACE (Building Resilience with Active Countercyclical Expenditures) program for credit into the government of Pakistan’s account with the State Bank of Pakistan.
By expanding the number of households getting financial aid each month, the loan aims to increase social protection while also enhancing economic opportunities and food security.
Additionally, it will aid in absorbing foreign economic shocks like a spike in global oil prices following the conflict between Russia and Ukraine.
Read Pakistan receives $1.5 billion from ADB
Pakistan’s foreign exchange reserves are thought to have increased to almost $9 billion with the acceptance of the $1.5 billion loan.
Earlier, in the week ending October 14, 2022, the reserves fell to a 40-month low of $7.6 billion. Data from the central bank shows that they were $20 billion in August 2021.
Global investors who had poured money into Pakistan’s US dollar-denominated bonds on the international market panicked when reserves of $7.6 billion were only enough for 1.1 months’ worth of imports.
The yields on the bonds (Eurobond and Sukuk) increased dramatically, and on Tuesday, the five-year CDS, a measure of the country’s default risk, was hovering at a 13-year high of 52.8%. (October 25).
It showed that international investors believed Pakistan would declare bankruptcy when its bonds, notably a $1 billion Sukuk that would expire in December 2022, came due.
In addition to the new ADB credit, Pakistan is scheduled to get a $500 million loan from the Asian Infrastructure Investment Bank (AIIB) this month.
Global investors’ worries should be allayed by loan receipts.
The country has secured $36–40 billion to pay off debt, cover the current account deficit, and increase foreign exchange reserves, the finance ministry has consistently promised investors.
