Foreign currency: Reserves decrease by 0.95%

Payments of $80m for external debt servicing bring down reserves

Our Correspondent August 16, 2014


Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased 0.95% during the week ended on August 8, according to data released by the SBP on Friday.

The central bank’s foreign exchange reserves decreased $89 million to $9.188 billion from $9.277 billion in the preceding week. The decrease in the reserves is mainly due to payments of $80 million on account of external debt servicing.

The SBP did not receive any significant inflows during the week.

Total liquid foreign reserves held by the country, including net foreign reserves held by banks other than the SBP, stood at $14.264 billion while net foreign reserves held by banks amounted to $5.076 billion on August 8.

Separately, the SBP injected liquidity of Rs85.9 billion into the banking system on Friday.

According to data released by the SBP’s Domestic Markets and Monetary Management Department, the central bank conducted an open market operation (injection), which resulted in Rs85.9 billion being accepted.

The tenor of the latest open market operation is seven days, with the accepted rate of return at 9.97% per annum.

This is the seventh open market operation (injection) of the SBP since the start of the fiscal year on July 1. The SBP injected a cumulative Rs420.25 billion in the first six operations.

The government reduced borrowing for budgetary support from the banking system during the last fiscal year, which helped the central bank mop up liquidity after an extended period of monetary injections, according to the Economic Survey 2013-14.

However, net federal government borrowings from scheduled banks in the first month of 2014-15 were Rs57.5 billion. This amount is substantially higher than the corresponding figure recorded in July 2013 when the government retired Rs281.8 billion.

Published in The Express Tribune, August 16th, 2014.

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