Pakistan forex reserves decline by over USD 2 bln

INTERNATIONAL DESK: As Pakistan’s economy continues to remain in doldrums, the country’s foreign exchange reserves declined by over USD 2 billion during the first 5 weeks of this fiscal year due to massive external debt servicing.

The reserves also reached below the USD 14 billion mark in the first week of August followed by continuous debt payment.

Seventy-five years of the independent polity have been tumultuous and turbulent for the state of Pakistan. Oscillating between military rule and civilian governments, the country to date has failed to witness even one complete five-year tenure of any of its Prime Ministers.

This offbeat political tug of war has raised various internal challenges for the state that was very much confident and self-assured of a shining future during the time of its formation. Especially, the last few years in Pakistan’s chronicle of instability have been exceptionally disturbed, leading to serious economic uncertainty.

With the depleting foreign currency reserves and rising inflation, the Islamic Republic is now on the brink of economic collapse. Inflation in Pakistan rose to 21.3 per cent in June this year, the highest since December 2008 when inflation stood at 23.3 per cent.

Petrol and diesel prices have skyrocketed and people are paying as much as Pakistani rupee 248 and Pakistani rupee 263, respectively for one litre of fuel. One of the Lahore residents said,

“Obviously inflation will go rising, unemployment will increase, people are dying, people are committing suicides. The government should do something to control the dollar rate”.

According to the United Nations Development Programme, Pakistan is facing a debt in excess of USD 250 billion.

Pakistan’s total liquid foreign exchange reserves plunged to USD 13.56 billion as of August 5, 2022 compared to USD 15.742 billion on June 30, 2022, depicting a decrease of USD 2.2 billion in the first five weeks of this fiscal year. The recent decline in reserve is due to massive scheduled external debt servicing.

However, the State Bank of Pakistan (SBP) Thursday said that external debt repayments are expected to moderate during the next three weeks of August. “In fact, around three-fourth of debt servicing for the month of August was concentrated during the first week,” it added.

The country for the last few months is facing a serious crisis of foreign exchange due to a record USD 39.58 billion trade deficit followed by a USD 72 billion import bill in the last fiscal year (FY22). The government is making efforts to build the sliding foreign exchange reserves and recently borrowed USD 2.5 billion from China.

Pakistan has also reached staff level agreement with IMF and the board is likely to release USD 1.1 billion as tranche of Extended Fund Facility (EFF) end of this month.

Pakistan posted a record USD 17.4 billion current account deficit in FY22 as against USD 2.8 billion in FY21. The policy makers are also expecting a sharp decline in the current account deficit followed by lower import bill.

According to the weekly foreign exchange report issued by SBP on Thursday, the country foreign exchange reserves further declined by USD 647 million during the last week. The total liquid foreign exchange reserves held by the country stood at USD 13.561 billion as of Aug 5, 2022 compared to USD 14.209 billion as of July 29, 2022.

During the week under review, SBP’s reserves decreased by USD 555 million to reach below the $8 billion mark due to external debt payments. The reserves held by the SBP declined to USD 7.83 billion at the end of the last week as against $8.385 billion a week earlier.

Net foreign reserves held by commercial banks also dropped USD 92.5 million to USD 5.7301 billion as of August 5, 2022 down from USD 5.823 billion as of July 27, 2022. (ANI)