Forex down to 9-year low at $4.3b

The foreign exchange reserves held by the central bank fell by 22.1% on a week-on-week basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.

On January 6, 2023, SBP’s foreign currency reserves were recorded at $4,343.2 million, down $1,233 million compared to $5,576.5 million on December 30.

According to the SBP, the decrease in reserves came due to external debt repayments.

Overall, the liquid foreign currency reserves held by the country, including the net reserves held by banks other than the SBP, stood at $10,187.8 million. Net reserves held by banks amounted to $5,844.6 million.

According to details, the reason behind the foreign reserves continuously falling is the pressure of external payments. Upon repaying the loans obtained from some Arab banks, the reserves witnessed a decrease of $1.223 billion in foreign exchange reserves in this last week.

After the recent Geneva convention, Pakistan is hoping to receive aid from friendly countries and donors including the United Arab Emirates (UAE), Saudi Arabia and China, which will help improve its foreign exchange reserves.

Earlier, in the week ended on December 23, the SBP’s reserves decreased by $294 million to $5,821.9 million as Pakistan repaid some of its external debt.

Research houses said that the reserves had hit their lowest level since April 2014, a more than eight-and-a-half-year low, hardly enough to cover five weeks of imports. Ideally, the country should have reserves enough to cover a minimum of three months of imports.

The domestic market is facing a shortage of US dollars amid a delay in the resumption of the International Monetary Fund’s (IMF) loan programme. With the reserves falling rapidly, investors are concerned about Pakistan’s ability to meet its foreign debt obligations.

Published in The Express Tribune, January 13^th, 2023.

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