The unprecedented gain of $276 million in foreign exchange reserves is unquestionably a glimmer of light in the catastrophic financial scenario after 14 weeks of nonstop deterioration. As there was no chance of receiving financial help from other financial organisations or friendly nations before the agreement with the IMF, the foreign exchange reserves continued to decline as a result of the delay in the agreement with the IMF. As a result, there was a constant risk that the country would go bankrupt and its foreign exchange reserves would be completely gone. However, as a result of this increase, the situation has improved, and if this trend continues, further improvement is anticipated. The likelihood of an agreement with the IMF next week is also good because the government has begun putting its conditions into practice.
On the week ending February 10, the State Bank reported that foreign exchange reserves had increased to $3.3 billion. The business banks have the amount of foreign exchange reserves is $5.5 billion, making a total of $8.7 billion in reserves. More than two weeks’ worth of imports can be covered by these foreign exchange reserves. It should be recalled that the nation’s foreign exchange reserves were down to less than $3 billion following last week’s payment of international obligations, hardly enough to cover domestic requirements for a week. With the deal with the IMF, there is still a chance to exhale with relief. The administration is moving quickly to enact additional levies following the deal.
The most recent mini-budget included the imposition of new taxes at Rs170 billion. The conclusion of the ninth review of the $7 billion deal with the IMF and the agreement mean that Pakistan would not only get $1.20 billion from the financial institution but also open the doors to financial aid from other international organisations and friendly nations. Failing to do so has resulted in Pakistan’s credit being further downgraded by the international rating agency Fitch, putting the nation in increased danger of declaring bankruptcy. In light of liquidity and policy issues, such as declining foreign exchange reserves, the agency lowered Pakistan’s long-term foreign currency issuance default rating from “CCC Plus” to “CCC Minus.” Hopefully, the road to recovery has begun.
