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Tuesday January 31, 2023

Pakistan's forex reserves increase $258m to $4.6bn

SBP reserves finally brake losing streak after outflow of $3.6 billion during last 8 weeks

January 19, 2023
A man counts dollar bills. — AFP
A man counts dollar bills. — AFP

The foreign exchange reserves held by the State Bank of Pakistan (SBP) reversed the descending trend and moved up by $258 million to $4.601 billion, the central bank said Thursday, without underlining the source of the currency influx.

According to an SBP statement, total liquid foreign currency reserves held by the country are $10.44 billion, whereas net foreign reserves with commercial banks are $5.84 billion.

The SBP reserves have finally broken the losing streak after an outflow of $3.6 billion during the last 8 weeks, Arif Habib Ltd said in a note.

SBP-held forex reserves have plunged to the lowest level since February 2014 after a decline of 22.11%.

Pakistan is in dire need of foreign aid to reduce its current account deficit as well as ensure enough reserves to pay its debt obligations for the ongoing financial year.

During the week ended on January 6, the central bank's forex reserves fell $1.233 billion, or 22.12% to $4.343 billion, down from last week's $5.576 million.

Pakistan's economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, but devastating floods and a global energy crisis have piled on further pressure.

The reserves, which hit their lowest level since February 2014, will now only provide import cover worth 0.82 months, as the country tries to lessen imports amid a greenback shortage.

A day earlier Governor State Bank of Pakistan Jameel Ahmed said the country's foreign exchange reserves position would strengthen in due course.

“We are expecting to witness inflows from next week onwards, which would reduce pressure on our foreign exchange reserves,” the SBP governor said in his address to the Federation of Pakistan Chambers of Commerce and Industry (FPCCI).

Ahmad added that following the inflows the position of foreign exchange reserves — which now stand at their lowest level since February 2014 — will improve paving the way for the removal of restrictions on imports.

Pakistan banned the import of all non-essential luxury goods in May to avert a balance of payments crisis and stabilise the economy. However, following severe criticism from stakeholders the authorities concerned removed restrictions on the import of some goods to facilitate the industries.

The low reserves led the SBP to place import restrictions earlier last year, much to the dismay of several importers and businesses in Pakistan that cited these curbs as the reason behind shutting down or scaling back their operations.

The SBP chief assured the businessmen that dollar inflows would start pouring in from next week following which decisions regarding import curbs will be taken.