Foreign exchange: SBP reserves drop 1.85%, go below $8b mark

Decrease comes on account of external debt servicing

KARACHI: The foreign exchange reserves held by the central bank fell below the $8-billion mark as they contracted 1.85% on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.

Earlier, the reserves had spiralled downwards, falling below the $7-billion mark, which raised concern over Pakistan's ability to meet its financing requirements. However, financial assistance from the United Arab Emirates (UAE) and Saudi Arabia helped shore up the foreign exchange reserves.

On May 31, the foreign currency reserves held by the SBP were recorded at $7,862.4 million, down $148 million compared with $8,010.2 million in the previous week.

The decline in reserves was attributed to payments on account of external debt servicing, the statement added.

Overall, liquid foreign currency reserves, held by the country, including net reserves held by banks other than the SBP, stood at $14,889.9 million. Net reserves held by banks amounted to $7,027.5 million.

A few weeks ago, the reserves had jumped on account of $2.5 billion in inflows from China.

Over time, the declining reserves have forced the central bank to let the rupee depreciate massively, sparking concern about the country's ability to finance a hefty import bill as well as meet debt obligations in coming months.

In April last year, 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 last year, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.