Alarm bells: SBP-held foreign exchange reserves down $389mn, now stand at $9.33bn

Foreign exchange reserves held by the State Bank of Pakistan (SBP) declined by $389 million, clocking in at $9.33 billion during the week ended July 15, 2022, a fall attributed "mainly to external debt repayments".

Data released on Thursday revealed total liquid foreign reserves held by Pakistan stood at $15.24 billion as of July 15, while net foreign reserves held by commercial banks amounted to $5.91 billion.

"During the week ended on 15-Jul-2022, SBP’s reserves decreased by US$ 389 million to US$ 9,328.6 million mainly due to external debt repayments," stated the SBP.

The reserves' position is critical for Pakistan that is desperately seeking dollar inflows to meet its balance-of-payments' needs. A low level of reserves has also caused severe pressure on its currency and stock markets, with the rupee touching record lows throughout the ongoing week.

Its stock market has also moved in tandem, with the benchmark KSE-100 Index falling below the 40,000 level for the first time since November 2020.

Pakistan reached a staff-level agreement with the International Monetary Fund (IMF) last week over fresh disbursement under its Extended Fund Facility (EFF), but inflows are not expected until next month.

At the same time, its reserves position has remained under two months of import cover, with the government as well as the SBP introducing various measures to cut down on dollar-expenses.