SBP forex reserves fall to near 9-year low of $3.7bn

KARACHI: The State Bank of Pakistan (SBP) foreign exchange reserves fell to $3.7 billion in the week to January 20, its lowest level since February 2014, central bank’s weekly data showed on Thursday

“During the week ended on January 20, 2023, SBP’s reserves decreased by $923 million due to external debt repayments,” the bank said in a statement.

Total liquid foreign reserves held by the country stood at $9.5 billion. Net foreign reserves held by commercial banks also fell $68 million to $5.8 billion.

The drop means the reserves are too low to cover more than three weeks of imports.

The latest figures on the foreign exchange reserves came as the rupee suffered a significant decline after the government relaxed its control to revive the bailout programme of the International Monetary Fund (IMF).

The rupee fell by 9.61 percent to 255.43 against the dollar in the interbank market.

The nation's reserves are depleting. Amidst the forex crisis, thousands of containers including raw materials, food staples, and medical supplies have been delayed at Karachi port.

, the SBP has relaxed import restrictions, giving import-driven businesses in distress a one-time facility and directing commercial banks to process import documentation to release the majority of the goods held at Karachi ports.

The need for "orderly debt restructuring" initiatives for Pakistan, according to analysts, is urgent given the country's declining foreign exchange reserves and rising external debt repayments, as delaying debt restructuring while the IMF bailout programme is stalled may have grave consequences.

The SBP’s governor at the latest post-monetary policy analyst’s briefing said that at the start of FY2023, the financing requirement was around $33 billion, which included $10 billion of current account deficit and $23 billion principal debt repayments.

“Now, due to import compression and better-than-expected current account gap numbers for six months of the current fiscal year, the deficit is expected to be below $9 billion, lower than the initially estimated $10 billion.”

He further explained that out of the $23 billion debt repayment, $15 billion had already been settled as $6 billion was rolled over and $9 billion repayment was made.

For the remaining $8 billion, he was hopeful that a rollover of around $5 billion would be done and the actual repayment to be of around $3 billion for which financing needs to be arranged.