The foreign exchange reserves held by the State Bank of Pakistan (SBP) fell by $784 million to a four-year low of $6.72 billion as of Dec. 2, according to data issued by the central bank on Thursday.
This is the lowest recorded level of the country’s foreign exchange reserves since January 2019, when reserves had stood at $6.6 billion. Apart from the SBP, the data showed that net reserves held by other banks equaled $5,866.8 million, meaning the total liquid foreign currency reserves held by the country are currently $12,581.7 million.
In a statement, the SBP said the decline of $784 million in a single week was largely due to the payment of $1 billion against maturing Pakistan Sukuk and some other external debt repayments. It claimed that some of this outflow had been offset by the $500 million received from the Asian Infrastructure Investment Bank (AIIB).
According to economists, Pakistan’s current forex position leaves it with an import cover of less than a month. The current value, they warn, is insufficient to service the $8.8 billion principal and interest payments due during January-March 2023. A key barrier to inflows remains the reticence of the International Monetary Fund (IMF) to conduct the 9th review of its bailout package for Pakistan and release the next tranche, which is triggering uncertainty in the markets and discouraging investment.
Promised funds from allied states, including China and Saudi Arabia also have yet to materialize, while aid committed to tackle the devastation of floods has also been far less than estimated.
More funds coming
In a podcast released on Thursday, SBP Governor Jameel Ahmad claimed more inflows were expected in the second half of the ongoing fiscal year, adding that the last five months had only seen $4 billion pour into the country’s coffers. He also claimed that the SBP had paid $1 billion and another $1.2 billion to two commercial banks, adding that these would be relent to the central bank in a few days.
For the next fiscal year, said Ahmad, around $33 billion were to be repaid to external stakeholders, including the current account deficit of $10 billion and $23 billion in loan repayments. Of the $23 billion external debt, he said, Pakistan had already repaid over $6 billion. Additionally, he said, a bilateral loan of $4 billion had been rolled over with the cooperation of relevant countries.
Discussions are underway, he said, to rollover another $8.3 billion, leaving around $4.7 billion in outstanding payments.
Acknowledging global pressures from the invasion of Ukraine, inflation and monetary tightening, the SBP governor said these were posing difficulties in raising funds from international financial markets. “Overall the situation is challenging; however, the SBP and government are taking measures to improve it,” he added.