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Critical: SBP-held foreign exchange reserves fall another $294mn, now stand at $5.82bn

  • This is the lowest level of central bank reserves since April 2014, and raises concerns on Pakistan's liquidity position
Published December 29, 2022

Foreign exchange reserves held by the State Bank of Pakistan (SBP) fell another $294 million to a highly critical level of $5.82 billion, data on Thursday showed. This is the lowest level of SBP-held reserves since April 2014.

Total liquid foreign reserves held by the country stood at $11.71 billion. Net foreign reserves held by commercial banks stood at $5.89 billion.

“During the week ended on Dec 23, 2022, SBP’s reserves decreased by $294 million to $5.82 billion due to external debt repayment,” said the SBP.

Last week, foreign exchange reserves held by the SBP had fallen $584 million to $6.12 billion.

SBP’s level of foreign exchange reserves, which stood at nearly $18 billion at the start of the year but has undergone significant depletion during the last 12 months, underscores the urgent need for Pakistan to complete the next review of the International Monetary Fund (IMF) programme.

As of now, talks on the ninth review seemed to have stalled over some prior conditions of the Washington-based lender.

At the same time, the country has also failed to secure much-needed funding from friendly nations.

The struggle has left policymakers in Pakistan scrambling to arrange foreign exchange amid heightened worries over the country’s debt payments and ability to finance imports.

However, Finance Minister Ishaq Dar reiterated on Wednesday that “there is no chance that Pakistan will default”, while admitting the country’s economy remained in a “tight spot”.

“Conditions are tight, but Pakistan will move forward. Pakistan will not default,” he said. “I admit that we do not enjoy the same level of foreign exchange reserves ($24 billion) we left back in 2016. But that is not the government’s fault, the fault is in the system and we must ensure that every stakeholder takes part in carrying the country forward.”

With depleting reserves, the SBP’s announcement of rolling back import restrictions it imposed in May and July 2022 surprised analysts.

However, it advised authorised dealers to actively engage with all their customers to process their requests, keeping in view the customers’ risk profile and liquidity conditions prevailing in the foreign exchange market.

The central bank added that ADs may prioritise or facilitate imports under essential imports, energy imports, imports by export-oriented industry, imports for agriculture inputs, deferred payment / self-funded imports and imports for export-oriented projects near completion.

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Rana Altaf Dec 29, 2022 07:09pm
Fact Sheet. People party and pmln both are feeling the heat of IPP' and imported coal lng power plants respectively. As you sow so shall you reap. This was the joint blunders of both parties. Now solution thar energy and after environmental heat energy their is fast melting of Hill Snow/ Glaciers. Mitigation is to construct all dams and KALA Bagh Dam. New Name can be Islamic Dam. Rana Amir [email protected]
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TimeToMovveOn Dec 29, 2022 07:33pm
There is a abject failure of leadership just about on all fronts in Pakistan. Military, Social, Economic, Foreign Policy. Pakistan needs a lot of reflection on how it got here. It needs a leader who can chart a new unified vision and can get people there. People thought that man was IK, but he turned out to be dud. PDM is just as worse. What is the future roadmap?
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zh Dec 29, 2022 09:45pm
The falling reserve is NOT a concern as long Pakistan has the master of Wirtshaftswunder Dar at the helm.
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Adnan Asghar Dec 30, 2022 12:26am
It is concerning to see that Pakistan's foreign exchange reserves have fallen to such a low level. It is important for the government to find a solution to this issue and address the urgent need for the next review of the IMF program. It is reassuring to hear that the Finance Minister has stated that there is no chance of default, but it is clear that the country's economy is facing some challenges. It will be interesting to see how the rolling back of import restrictions will impact the situation.
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