Pakistan’s central bank sends SOS to PM Sharif on dwindling forex reserves

INTERNATIONAL DESK: State Bank of Pakistan has issued an SOS alert to Prime Minister Shehbaz Sharif-led government of its declining foreign exchange reserves and its negative effect on the country’s ability to import.

Local media reported that the bank had warned the government that if the country’s depleting foreign exchange reserves are not addressed, it would be impossible to import goods from other nations.

This SOS call comes at a time when the banks’ Forex reserves are rapidly declining.On June 17, SBP’s Forex reserves fell to USD 8.24 billion.

The SBP has pushed for a temporary ban on the import of all non-essential goods to help maintain the declining Forex market.

In light of the country’s energy security, the bank has reportedly highlighted the possibility of increasing fuel imports.

During the fiscal year 2020-21, Pakistan’s total petroleum import was USD 9.7 billion. However, Pakistan’s import bills have risen to more than USD 14.46 billion in the current fiscal year’s July-April period.

The Forex reserves in Pakistan are depleting to the point where they are jeopardizing the country’s ability to import fuel as Pakistan has increased its energy imports.

The Pakistani government has already withdrawn a number of fuel subsidies, leading to a sharp increase in domestic energy prices.

According to the media portal, the Ministry of Energy and Petroleum should be compelled to devise and implement strict policy plans to curb demand for energy products.

The depreciating Pakistani Rupee (PKR), to put it mildly, is further compounding the problem.

Pakistan is in a vicious cycle.It is worth mentioning that depreciating currencies result in a rise in fuel import bills, which makes the fiscal situation even more difficult.

SBP has recently attempted to make some large-scale changes in the currency. Nevertheless, its inability to control the exchange rate has yielded only marginal returns.