The State Bank of Pakistan-held foreign exchange reserves plummeted to a critical level after falling 10.45% to $6.7 billion to a four-year low.
Data
released by the central bank showed that the foreign currency reserves
held by the SBP were recorded at $6,714.9 million as of December 2, down $784
million compared with $7,825.7 on November 25.
The
foreign exchange reserves have fallen below the $7 billion level for the first
time since January 2019.
The
current reserves stand at around $6.7 billion — almost equal to $6.6 billion on
January 18, 2019.
The
central bank attributed the decline to the payment of $1,000 million against
maturing Pakistan
International Sukuk and some other external debt repayments.
The
SBP mentioned that some of the debt repayments were offset by inflows, mainly
$500 million received from Asian Infrastructure Investment Bank (AIIB).
Overall
liquid foreign currency reserves held by the country — including net reserves
held by banks other than the SBP — stood at $12,581.7 million. Net reserves
held by banks amounted to $5,866.8 million.
With
the current foreign exchange reserves position, Pakistan has an import cover of
less than one month.
The
$6.7 billion reserves are not enough to service the $8.8 billion principal and
interest payments during the January-March period of the current fiscal year.
Commenting
on the severity of the dollar crunch, the Ministry of Finance’s former adviser
Dr Khaqan Hassan Najeeb, said that it is important to consider that Pakistan
has only received $4 billion dollars in the last five months (July-November
2022) — this is beside the Saudi Arabia
rollover.
“The
slow inflow of funds, heavy payments — including Sukuk payment — and a less
than satisfactory financial account have all added pressure on the reserves
which now barely cover a month and 10 days of import payment,” he stated.
The
economist added that depleting foreign reserves hurt the confidence of both
domestic and foreign investors, keeps markets jittery and add pressure on the
foreign exchange markets.
“Pakistan
needs to immediately ensure that the ninth review of the International Monetary
Fund (IMF) is completed and fund flows from bilateral and multilateral donors
for projects are received immediately to shore up our reserves,” he suggested.