SBP-held foreign exchange reserves plunge another $1.23 bn, now stand at $4.3bn

Foreign exchange reserves held by the State Bank of Pakistan (SBP) fell by a hefty $1.23 billion to a highly critical level of $4.34 billion, data released on Thursday showed. This is the lowest level of SBP’s reserves since February 2014.

Total liquid foreign reserves held by the country stood at $10.19 billion.

Net foreign reserves held by commercial banks stood at $5.85 billion.

“During the week ended on Jan 6, 2023, SBP’s reserves decreased by $1,233 million to $4,343.2 million due to external debt repayments,” said the SBP.

Pakistan repaid over one-billion-dollar external debt to international financial institutions last week on Friday. This repayment has been reflected in the data released today.

“Pakistan has paid back $600 million to the Emirates NBD Bank, the leading Banking Group in the MENA region, and $420 million to the DIB on Friday,” sources in the SBP confirmed last week.

In the previous week, foreign exchange reserves held by the SBP had fallen $245 million to $5.58 billion.

The central bank reserves, which stood at nearly $18 billion at the start of the 2022 but have undergone significant depletion, underscore 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.

Although the country is facing a serious crisis of foreign exchange reserves, it is meeting international financial obligations to avoid default.

At the same time, policymakers are scrambling to secure inflows of dollars with Prime Minister Shehbaz Sharif’s visit to the UAE part of the efforts.

On Thursday, United Arab Emirates agreed to roll over the existing loan of $2 billion and provide an additional loan of $1 billion, according to the Prime Minister’s Office. Pakistan also signed an agreement with the Saudi Fund for Development (SFD), a Saudi Arabian government agency that provides development assistance to developing countries, to finance oil derivatives worth $1 billion to Pakistan.

Pakistan also secured pledges of nearly $10 billion at the ‘International Conference on Climate Resilient Pakistan’ in Geneva earlier this week. However, 90% of the commitments are project loans, and will be part of inflows when projects start to materialise.

Experts believe the inflows are still not nearly enough to meet Pakistan’s bulging import needs, which have been fiercely tamed in view of the dollar shortage.