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Tuesday January 31, 2023

Forex reserves decline by $327m; expected to rise next week after addition of AIIB proceeds

With current foreign exchange reserves position, Pakistan has an import cover of less than 1.6 months

December 01, 2022
A representational image of a $100 note and a coin. — AFP/File
A representational image of a $100 note and a coin. — AFP/File

KARACHI: In line with the dominant trend for the last several weeks, the country’s foreign exchange reserves held by the State Bank of Pakistan (SBP) once again declined by 4.17%.

On November 25, the foreign currency reserves held by the SBP were recorded at $7,498.7 million, down $327 million compared with $7,825.7 on November 18, data released by SBP showed on Thursday.

Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $13,378.2 million.

Net reserves held by banks amounted to $5,879.2 million. The central bank cited external debt repayment as the reason behind this decline.

With the current foreign exchange reserves position, Pakistan has an import cover of less than 1.6 months.

The reserves are expected to register gains next week as the Government of Pakistan received $500 million from Asian Infrastructure Investment Bank (AIIB). The Ministry of Finance in its tweet had said that funds are deposited with SBP and “will augment Pakistan’s reserves”.

The development did not reflect in SBP’s data as the amount was received after the cut-off date. The assistance will reflect in the reserves next week.

However, Pakistan has to repay a $1.08 billion international bond, which matures on December 5. This payment might put additional pressure on the already depleting foreign exchange reserves as SBP chief Jameel Ahmad last week, in the post-monetary policy briefing, revealed that the payment will be made three days before its due date i.e. December 5.