SBP-held foreign exchange reserves plummet by $145mn to $10.16bn

Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased by $145 million in the period between May 6 to May 13 to stand at $10.16 billion, said the central bank on Thursday, with the level staying at less than 1.5 months of import cover.

In the week ending May 6, the level had decreased by $190 million to $10.31 billion.

Total liquid foreign reserves held by the country stood at $16.16 billion as of May 13, the SBP said in a note. Reserves held by commercial banks clocked in at $5.99 billion.

All-time low: Rupee closes at 200 in inter-bank trading for first time against US dollar

Reserves held by the SBP have been on a declining trend, with Pakistan desperately seeking revival of the International Monetary Fund (IMF) programme, hoping it will pave the way for lending from other sources as well.

Earlier this week, the Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) stressed the need for stopping a steep decline in foreign exchange reserves of the State Bank, terming it the key economic challenge for the new government, as the ballooning trade deficit along with dried up dollar inflows and external debt payments have plunged the foreign exchange reserves to a record low since Dec 2019.

FPCCI former president and BMP Chairman Mian Anjum Nisar observed that the since imports were rising at a rapid pace, the new government would likely to continue with import restricting policies.

On Thursday, Minister for Information and Broadcasting Marriyum Aurangzeb announced that the government had imposed a ban on the import of all non-essential luxury items in an effort to take the country out of the existing financial crisis.

Nisar also said the urgent task that needed to be taken up was foreign exchange reserve management and for this purpose the major focus should be on negotiation with the IMF. Strong relations with the US, China, and Saudi Arabia are very important in determining the outlook of foreign flows to the country and roll over of maturing debt, he added.

With the current account deficit topping $1 billion, market experts have voiced concern over Pakistan's balance of payments. The rupee has also come under pressure, falling 0.81% on Thursday to close at an all-time low of 200.00 against the US dollar in the inter-bank market.

Meanwhile, Finance Minister Miftah Ismail has reaffirmed the government’s commitment to undertake the reforms envisaged under the IMF programme and to complete the structural benchmarks as talks on the 7th Review of Extended Fund Facility (EFF) kicked off in Doha.