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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