State Bank’s forex reserves fall below $12 billion

 
April 03, 2020

By our correspondentKARACHI: Pakistan’s official foreign exchange reserves sharply fell 6.7 percent to 11.185 billion - the lowest since December 2019 - due to higher debt repayments and...

Share Next Story >>>

By our correspondent

KARACHI: Pakistan’s official foreign exchange reserves sharply fell 6.7 percent to 11.185 billion - the lowest since December 2019 - due to higher debt repayments and capital outflows from the country.

The reserves held by the State Bank of Pakistan (SBP) declined by $804 million in the week ended March 27. Reserves stood at $11.336 billion in December last year.

“This decline is attributed primarily to government external debt payments that amounted to $441 million, and other official payments,” the central bank said in a statement.

The reserves of commercial banks, however, rose to $6.201 billion from $6.115 billion. The country’s total liquid foreign reserves stood at $17.387 billion, compared with $18.105 billion in the previous week.

Analysts said the fall in the foreign currency reserves of the SBP was due to increased external debt servicing and frequent foreign selling in local currency bonds and capital market. Current level of SBP reserves was sufficient to cover three months of imports.

Pakistan suffered net capital outflows, as foreign investors sold net $1.9 billion of short-term rupee debt (treasury bills) last month. Foreign investors bought $3.1 billion worth of T-bills in the eight months of the current fiscal year.

A major cut of 225 basis points in interest rate by the central bank in March, along with uncertainty in global market amid coronavirus pandemic, accelerated foreign fund outflows from government securities, putting pressure on the rupee and forex reserves. The government eyes $4 billion emergency financing from multilateral donors to combat the devastating effects of COVID-19 outbreak and the deterioration in global economic and financial conditions.

The International Monetary Fund is considering Pakistan’s request for financial assistance under its Rapid Financing Instrument facility to boost the country’s foreign exchange reserves and budgetary support in the wake of adverse impact of the pandemic on the country’s economy.



More From Business