Pakistan’s central bank reserves fall below $7bn after over 5 months

Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased by $136 million on a weekly basis, clocking in at $6.9 billion as of December 15, data released on Thursday showed.

This brings the SBP reserves to an over five-month low as the dollar stockpile was last seen below $7 billion on July 7, 2023 when the reserves stood at $4.5 billion.

This week, total liquid foreign reserves held by the country stood at $12 billion. Net foreign reserves held by commercial banks stood at $5.1 billion.

The central bank attributed the decline in the reserves to debt repayments.

“During the week ended on 15-Dec-2023, SBP’s reserves decreased by US$ 136 million to US$ 6,904.8 million due to debt repayments,” it said.

Last week, Pakistan’s central bank reserves had increased by $21 million.

After an alarmingly low level in July, reserves held by the central bank got a boost as Pakistan received the first tranche of around $1.2 billion from the International Monetary Fund (IMF) after the lender approved a new $3-billion Stand-By Arrangement (SBA). It also got inflows from Saudi Arabia and the UAE.

However, the SBP reserves have been under pressure due to debt repayments, rise in import payments after easing restrictions, and a lack of fresh inflows.

In a major breakthrough, the IMF announced last month that its staff and Pakistani authorities had reached an agreement on the first review of the SBA.

The staff-level agreement is subject to approval by the IMF Executive Board, which is scheduled to meet on January 11.

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilisation program supported by the IMF’s US$3 billion (SDR2,250 million) SBA,” the IMF said in its press release then.

“The agreement is subject to approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion,” it added.