Foreign exchange reserves held by the State Bank of Pakistan (SBP) dropped a massive $923 million to a mere $3.7 billion, data released on Thursday showed. This is the lowest level of SBP-held reserves since February 2014.

Total liquid foreign reserves held by the country stood at $9.5 billion. Net foreign reserves held by commercial banks stood at $5.8 billion.

Last week, foreign exchange reserves held by the SBP rose by $258 million to $4.6 billion. This was the first increase in eight weeks.

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.

On Thursday, the IMF said that its mission will visit Islamabad at the end of this month to continue discussions under the ninth Extended Fund Facility (EFF) review.

Talks on the ninth review have remained stalled over 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.

On Thursday, Pakistan’s rupee witnessed historic depreciation against the US dollar in the inter-bank market, settling with a loss of 9.6% in a single session as the country finally moved to fulfil part of the IMF conditions that included a ‘free-float exchange rate’.

As per the State Bank of Pakistan (SBP), the rupee closed at 255.43 against the US dollar, a depreciation of 9.61% or Rs24.54.

“Officially the largest decline in PKR, both in absolute and percentage terms, since the introduction of the new exchange rate system in 1999,” said Ismail Iqbal Securities in a note.

Arif Habib Limited (AHL) said overall, this was the second highest decline in % terms in history. “The highest was in October 1998 when it fell 9.9%,” AHL told Business Recorder.

Earlier, 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.