Foreign exchange reserves held by the State Bank of Pakistan (SBP) dipped $106 million, clocking in at an alarming level of $7.9 billion as of September 30, 2022, according to data released on Thursday.

Total liquid foreign reserves held by the country stood at $13.59 billion, said the SBP on Thursday. Net foreign reserves held by commercial banks amounted to $5.69 billion.

Alarming level: SBP-held foreign exchange reserves decline $341mn to $8bn

“During the week ended on September 30, 2022, SBP’s reserves decreased by $106 million to $7,899.8 million due to external debt repayment which includes interest payments on Eurobonds,” said the SBP.

In September, SBP's reserves had increased as the central bank received the $1.2-billion tranche from the International Monetary Fund (IMF).

The Saudi Development Fund also rolled over a $3-billion deposit with the SBP, an amount that was due to mature in December 2022. However, this development was not meant to increase foreign exchange as the amount was already part of SBP's reserves.

The reserves’ position is critical for Pakistan which has been desperately seeking dollar inflows to meet its balance-of-payments needs.

A low level of reserves caused severe pressure on its currency market with the rupee witnessing its worst monthly performance in July in over 50 years. The rupee gained some ground as Pakistan met all prior conditions of the IMF, a development that helped it secure $1.17 billion of inflow under the Extended Fund Facility (EFF), but came under pressure once again as floods hit and import restrictions eased.

The local currency has staged a recovery over the past 10 days, closing at Rs221.94 per dollar on Thursday, as markets factored in the return of Ishaq Dar as finance minister, with the bullish trend prevailing due to sentiment.