An overview of Pakistan’s plunging forex reserves in global perspective

LAHORE: With just around US $3 billion foreign exchange reserves left in its coffers, Pakistan does not possess adequate resources to pay for its critical imports like crude oil or service its whopping external debt of nearly $130 billion, hence limiting the State Bank’s available responses in the event of an economic crisis that is probably looming.

Remember, Pakistan’s external debt obligations are in excess of US $73 billion for the next three years (fiscal years 2023 to 2025). Poor stock of these forex reserves has thus led to a situation where the national economic wizards in Islamabad are unable to control the country’s exchange rate with other currencies and the gloomy scenario has, therefore, adversely affected the country’s global trade.

The International Monetary Fund (IMF) defines the foreign reserves as external assets that a country’s monetary authority can use to meet the balance of payments financing needs. In terms of forex reserves, Pakistan today lags too far behind Bangladesh even.

According to the Bangladesh bank’s data, the country’s foreign exchange reserves stood at US $33.79 billion at the end of November 2022, down from $35.809 billion in October 2022. (Reference: China’s Xinhua news agency)

Pakistan is hence slowly inching closer to the economically-devastated Sri Lanka, whose forex reserves had rested at $1.9 billion in December 2022. According to the IMF, an esteemed British news agency Reuters, Messrs Statista (a globally-acclaimed German online platform specialised in market and consumer data) and noted Western media houses especially “Nikkei” (world’s largest financial newspaper, with a daily circulation exceeding 1.73 million copies), here follows a list of countries with highest forex reserves in their respective kitties.

China ($3.122 trillion in December 2022), Japan ($1.226 trillion in November), Switzerland ($848.5 billion in December 2022), India ($573.73 billion by January 20, 2023, according to the Reserve Bank of India), Russia (US $571 billion as of December 2, 2022), Hong Kong ($423.1 billion in November 2022), South Korea ($399 billion in December 2022), Saudi Arabia ($459.87 billion in December 2022), Singapore ($279.8 billion in December 2022), Brazil ($293.3 billion in December 2022), Germany ($106.35 billion in November 2022), France ($256.95 billion in 2023), United States ($242.7 billion), United Kingdom ($119.4 billion) and UAE ($119.4 billion) as well.

A January 12, 2023 report published by “Nikkei” newspaper states: “Foreign currency reserves worldwide shrank 10 percent in the first nine months of last year as countries like Japan scrambled to defend their currencies against a rapidly strengthening dollar. The global total dropped to $11.6 trillion at the end of September, falling below $12 trillion for the first time since March 2020, according to the International Monetary Fund.”