Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) dropped by 11.9% on a weekly basis, reaching $3.5 billion, according to data released on Thursday. The decrease of $482 million on June 16, 2023, compared to the previous week’s reserves of $4.02 billion was primarily attributed to external debt repayment.
The SBP received $300 million from the proceeds of a Government of Pakistan commercial loan during the current week. However, these inflows will be reflected in the reserves position to be published on June 23, 2023, stated a press release.
Taking into account the overall liquid foreign currency reserves, including those held by banks other than the SBP, the total reserves stood at $8.86 billion, with net reserves held by banks amounting to $5.33 billion.
Head of Research at Ismail Iqbal Securities, Fahad Rauf highlighted that the revival of the International Monetary Fund (IMF) loan programme and fresh financing from multilateral and bilateral creditors were crucial for significant improvements in Pakistan’s foreign currency reserves. He projected that the reserves were expected to increase to approximately $7-8 billion by the end of the current fiscal year.
While the recent intervention by the central bank in the interbank market to purchase US dollars has led to a slight improvement in forex reserves, the critically low reserves raise concerns about a potential debt default if the IMF program remains off track. “The availability of surplus dollars in the interbank market prompted the central bank to intervene by buying the surplus,” explained a source.
Published in The Express Tribune, June 23rd, 2023.
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