The State Bank of Pakistan's foreign exchange reserves posted a notable decline of $800 million in two weeks primarily due to external debt and other official payments.
The SBP's reserves are on the decline for the last two weeks due to massive outflow of foreign investment in the government debt securities. Foreign investors have divested some $1.6 billion from the investment in government of Pakistan Market Treasury Bills (T-Bills) this month.
According to weekly foreign exchange report issued Thursday, during the week ended March 20, 2020, the SBP's reserves decreased by $690 million to $11.989 billion compared to $12.679 billion a week earlier. This decline has been attributed to government external debt payments amounting to $391 million and other official payments, the SBP said.
During last week, the SBP's reserves also dropped by $110 million due to repayments related to external debt, Hajj and other official payments. Collectively, the SBP's reserves fell sharply by $800 million in just two weeks to below $12 billion, mainly due to flight of hot money, which the SBP believes is due to global slowdown in major economies.
According to the report, during last week, reserves held by banks slightly increased by $52.5 million to $6.116 billion as on March 20, 2020 up from $6.063 billion on March 13, 2020.
Analysts are expecting further decline in the SBP's reserves as divestment by foreign investors from the government debt securities is gradually accelerating. Overall, the outflows surged to $1.9 billion against the inflows of $3.4 billion in government papers.