Foreign exchange reserves held by the State Bank of Pakistan (SBP) stood at $9,485.8 million on July 11 after registering a decrease of 1.2% over the preceding week, data released by the central bank on Thursday showed.
The central bank’s foreign exchange reserves decreased $116 million to $9,485.8 million at the end of the second week of 2014-15 as opposed to $9,602 million on July 4.
During the week ending on July 11, the SBP made payments of $31 million on account of external debt servicing and other official payments. During the same week, the central bank received $22 million from multilateral and bilateral sources.
Total liquid foreign reserves held by the country, including net foreign reserves held by banks other than the SBP, stood at $14,513.6 million, while net foreign reserves held by banks amounted to $5,027.8 million on July 11.
On a year-on-year basis, Pakistan foreign exchange reserves rose more than 50% in 2013-14. The steep rise in the SBP-held foreign exchange reserves in the second half of the last fiscal year has been praised by international financial institutions as well as global rating agencies.
For example, the International Monetary Fund (IMF) has praised the SBP for its performance on the foreign exchange reserves position. “Encouraged by favourable market conditions, in recent months the SBP has considerably stepped up its purchases of foreign exchange in the spot market. This laudable effort has contributed to the sharp recovery in reserves,” the IMF said in its third review under the Extended Arrangement for Pakistan.
Although the SBP-held foreign exchange reserves increased dramatically in the last fiscal year, the IMF noted in the report that they remain at low levels and that the central bank should continue its efforts until reserves ‘comfortably exceed’ three months of import cover.
“Greater willingness to accommodate downward exchange rate flexibility could play an important role in accelerated reserves accumulation while helping boost exports over time,” it said.
International ratings agency, Moody’s Investors Service, revised the outlook on Pakistan’s foreign currency government bond rating to stable from negative. One of the reasons it cited for the upgrade was rising foreign reserves. It also predicted that the continued implementation of structural reforms would further buffer Pakistan’s foreign reserves in the future.
Published in The Express Tribune, July 18th, 2014.
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