KARACHI: The foreign exchange reserves held by the central bank continued to spiral downwards for the 10th successive week as they fell 0.61% on a weekly basis, according to data released on Thursday.
The continued drop in the reserves raises concern about Pakistan’s ability to meet its financing requirements as the reserves have fallen below the $8-billion mark.
However, the government announced on Tuesday last week that it had managed to secure a financial package of $6 billion from Saudi Arabia. This will help provide much-needed breathing space to the government of Prime Minister Imran Khan.
Although the impact is yet to be seen, the Saudi assistance will immediately push the official foreign currency reserves back into double digits in addition to lessening the stress on the external sector.
The prime minister has also left for China to seek further assistance. Additionally, in early October, Pakistan formally requested the International Monetary Fund (IMF) on the sidelines of IMF-World Bank annual meetings to help address the country’s economic challenges.
On October 26, the foreign currency reserves held by the State Bank of Pakistan (SBP) were recorded at $7,776.9 million, down $48.1 million compared with $7,825 million in the previous week.
The decrease was attributed to external debt servicing and other official payments.
Overall, liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14,184.5 million. Net reserves held by banks amounted to $6,407.6 million.
A month ago, China agreed to immediately give a loan of $2 billion to Pakistan, a move meant to arrest the slide in foreign currency reserves and provide much-needed breathing space for the new government.
Earlier, the reserves dipped to $9.06 billion, forcing the central bank to let the rupee depreciate massively for the fourth time since December 2017 and sparking concern about the country’s ability to finance a hefty import bill as well as meet debt obligations in coming months.
In April, the SBP’s reserves increased $593 million due to official inflows. A few months ago, the reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank.
The SBP also received $350 million under the Coalition Support Fund (CSF) earlier.
In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.