Foreign currency: With heavy debt repayment, reserves fall to $3.1b

Figure likely to improve after receiving $554m IMF loan tranche.

Our Correspondent December 26, 2013
Pakistan’s foreign exchange reserves have been under pressure because of continuously dwindling reserves held by the SBP. PHOTO: FILE


Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased to $3.1 billion on December 20 as opposed to $3.4 billion a week earlier, showed data released by the SBP on Thursday.

The decline of 7.9% in the foreign exchange reserves came as a result of payments amounting to $185 million, according to a spokesman for the central bank.

Out of the payments of $185 million, external debt servicing was $162 million including $58 million repayment to the International Monetary Fund (IMF), and other official payments amounting to $23 million.

There was no major inflow from multilateral and bilateral sources during the week, which caused the drop of $275 million in the period under review.

However, the second tranche of the Extended Fund Facility of $554 million, which was cleared after the successful completion of the first review by the IMF, was received on December 23, and hence will be reported in the next week’s reserve position.

Total liquid foreign reserves in Pakistan amounted to $8 billion on December 20, which was 5.1% less than the preceding week’s figure. Similarly, net foreign reserves held by banks other than the SBP stood at $4.8 billion, which was 3.1% less than the corresponding figure on December 13.

Pakistan’s foreign exchange reserves have been under pressure because of continuously dwindling reserves held by the SBP. They amounted to a little over $6 billion at the end of June, which reflects a decline of almost 47% in roughly six months.

The rupee has appreciated against the dollar in only two of the last 30 years (2002 and 2003) while average annual depreciation of the rupee over the same period has stood at 6.5%. However, the rupee has undergone a sharp 6% depreciation since July this year when it traded around Rs99.

Most analysts believe the recently received IMF tranche of $554 million will stabilise the foreign reserves position, but only in the short term.

Most brokerage houses expect the rupee-dollar parity to hover in the range of Rs108-112 mainly because of few major inflows in the second half of fiscal year 2013-14, despite recent statements by the finance minister claiming a reversal of trends which will see the rupee appreciate in value.

Published in The Express Tribune, December 27th, 2013.

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Wake Up | 7 years ago | Reply

@Shakib: No country will ever have to worry about the rise of Pakistan if the mindset of a significant number of Pakistanis is like yours. I hope it isnt for Pakistans sake. Pakistan needs clean politicians who are interested in helping their own people before acting like the thekedars of islam. There is no room for different opinions in Pakistan. Its so easy to label someone as anti-national or a RAW/CIA agent or blasphemous or even not a muslim. When the state itself has laws that discriminate against its own people based on their beliefs then its not surprising things have only been getting worse.

The lower and middle classes need to wake up and focus on Pakistan instead of being fooled by leaders on the pretext of religion and some innate sense of superiority expecting handouts from other countries (USA, China, also India etc.). The govt must forget Kashmir, Afghanistan, strategic assets, USA etc. for once and actually help the average Pakistani. I fear it might be too late but Im still hopeful that good sense will prevail.

Policy and decision makers in Pakistan have proven in the last 65+ years that COMMON SENSE IS ACTUALLY NOT SO COMMON.

Raza | 7 years ago | Reply

Lol. Children, this is what you get when you get rid of a sincere and competent leader in President Musharraf and replace them with the feudals. Now enjoy! As long as there is corruption, militancy, power shortages and a total lack of attention to the economy from our democractic governments, this will continue.

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