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SBP’s Forward Swap Liabilities Reduced to $4.6 billion and Foreign Exchange Reserves Soared to $13.4 Billion

The 51st meeting of the National Assembly Standing Committee on Finance and Revenue was held at Parliament House, Islamabad, under the chairmanship of Member National Assembly (MNA), Faiz Ullah.

The Committee discussed the Post Office Cash Certificate (Amendment) Bill 2020, along with the Post Office National Savings Certificates (Amendment) Bill, 2020, and the Government Savings Bank (Amendment) Bill 2020 (Government Bill).


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Ministry of Finance Additional Secretary informed the committee that in the backdrop of the Judgment of the Supreme Court of Pakistan (SCP), the Federal Cabinet inter-alia decided that all Ministries and Divisions should, in consultation with the Law and Justice Division, make amendments in the respective Acts/Rules, and replace the words, “Federal Government” with appropriate authority/authorities.

He also explained the reasons for suggesting these changes in different sections of the Bill. The Committee Members have expressed their concerns regarding proposed amendments. The Committee deferred the Bills and decided to confer with the Ministry of Law in the upcoming meeting of the Committee thereon.

The Committee deferred the agenda regarding the scrutiny of the budgetary proposals of the Ministry of Finance and Revenue due to the late receiving of the brief by the Finance Division. The Committee decided to hold the next meeting in this respect on February 22, 2021.

The Secretary M/o Finance briefed the Committee regarding circular debt and its financial implication for the upcoming budget. He informed that circular debt was of two types, i.e., Debt Stock and Flow.

While talking about the Flow Debt, he said that due to the continuous rising of heavy payables charge and late payment surcharge, it is rising about Rs. 45 billion every month currently.

Later on, Additional Secretary, Finance Division informed the Committee about the causes of circular debt and presented the important numbers for December 2020, in total and breakup wise. He said that PHPL/CPPA number could vary for want of reconciliation or payments in transit.


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He further highlighted the main initiatives adopted by the present Government, such as Mobilized funding of Rs. 400 billion through Islamic financing to clear the debt stock, Rationalized tariff determination with minimum impact on the lower category of consumers (1-300/units), and released TDS Rs. 226 billion in FY 2019-20 and budgetary allocation of Tariff differential. He said that subsidy of Rs. 52 billion has been released, so far.

Kamran Ali Afzal, Secretary Finance Division, informed that Finance Division was working with Power Division on a two-pronged strategy, i.e., settlement of debt stock and capping the flow, including debt stock of PHPL Rs. 806 billion to public debt, which will be paid over the next five years.

Accordingly, Rs. 72 billion will be paid to lending banks during the current financial years, and an amount of Rs. 28 billion has been paid to date in that account.

The Secretary stated that currently, the Government has decided to settle the payable CD of over Rs. 1,300 billion by taking certain measures, such as engaging IPPs for a voluntary reduction in tariff and settlement of outstanding amount as of November 2021 Rs. 500 billion in two tranches, i.e., 40 percent in the next 3-4 weeks and 60 percent in August.

The circular debt management plan (CDMP) implementation is also in the offing to offset the negative impact of CD on the economy inter alia with the key pillars.

The Committee Members expressed their grave concerns about the policies adopted by the Government and loopholes in its implementation in preventing the spread of circular debt. The Committee Members were of the view that an increase in circular debt will create problems for the economy of the country, especially towards the smooth functioning of the industries.


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After a detailed discussion, the Committee unanimously decided that Power Division may be invited to the next meeting of the Committee for further deliberations in this regard.

State Bank of Pakistan (SBP) Director, Muhammad Ali Malik, apprised the Committee about the Foreign Exchange Reserves vis-à-vis Capital Account Pressure for the remaining FY2021, in light of increasing forward swap position.

He said that since June 2019, foreign exchange forward swap liabilities of SBP have shown a declining trend in general and reduced to $4.6 billion at the end of November 2020. This showed an improvement of $3.4 billion and $1.2 billion from June 2019 and June 2020, respectively.

This is in addition to the improvement in SBP Fx reserves, which have also improved. The reserves were recorded at $7.3 billion at the end of June 2020, and currently, they stand at $13.4 billion as of January 8, 2021.

This improvement of Fx reserves of SBP and forward swap position reflects the improved balance of payment position of the country.

The current account of Pakistan also posted a surplus of $ 1.6 million in the first five months of FY2021.

The Committee Members have expressed their apprehensions about expecting pressure on foreign reserves due to upcoming repayment schedules, in case of the suspension of the IMF Program.


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However, Director SBP responded that Chinese debt repayments could be rolled over and IMF Program could be extended. He also informed the Committee that the Government received $480 million in the ‘Roshan-Pakistan Program.’

The meeting was attended by MNAs, Sadaqat Ali Khan Abbasi, Makhdoom Syed Sami-ul-Hassan Gillani, Jamil Ahmed Khan, Faheem Khan, Dr. Ramesh Kumar Vankwani, Qaiser Ahmed Sheikh, Chaudhary Khalid Javed, Ali Pervaiz, Dr. Aisha Ghaus Pasha, Nafisa Shah, Syed Naveed Qamar (through video link) and Hina Rabbani Khar (through video link).

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