The federal government is likely to lift curbs on the opening of letters of credit (LCs) as the country’s foreign exchange reserves improve. Doing so would give a much needed boost to the indebted economy, as Pakistan is reeling from dollar shortage, capital flight, investor hesitancy, and a recent hike of 300 basis points in the interest rate.
According to latest State Bank (SBP) data, the foreign currency reserves held by the central bank stood at $3.814 billion, a precariously low figure for the indebted South Asian country. Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $9.267 billion.
Sources are optimistic that the central bank could start opening LCs — with pending LC cases worth nearly $400 million already — in the coming days. This would facilitate trade and revive economic interactions.
Addressing a press conference yesterday (Friday), finance minister Ishaq Dar said that he expected the reserves held by the central bank to reach $10 billion by the end of June.
He also announced that Pakistan is likely to receive around $1.3 billion from the Industrial and Commercial Bank of China (ICBC). Pakistan would receive the first tranche of $500 million in the next few working days, with another tranche of $500 million expected in the next ten days. Sometime thereafter, the remaining amount of $300 million will also be transferred.