SBP forex reserves fall by $59m to $7.6bn

KARACHI: Pakistan’s foreign exchange reserves held by the central bank decreased by $59 million to $7.636 billion in the week ending September 22, the State Bank of Pakistan said on Thursday.

The total reserves of the country fell by $25 million to $13.162 billion. However, the reserves of commercial banks rose by $34 million to $5.525 billion.

The SBP’s forex reserves are enough to cover 1.78 months of import payments. The SBP attributed a decline in reserves to external debt repayment.

Analysts said that the reserves declined marginally. During October, some flows are anticipated to come from multilateral sources. However, drawing larger flows would depend on the outcome of the review of the International Monetary Fund’s stand-by arrangement, which is expected for November. Current conditions make it challenging for commercial flows.

The government expects the external financing requirement during the current fiscal year is $20 billion.

Falling remittances and the current account deficit put pressure on reserves, but analysts anticipate an improvement in trade gap, along with the anticipated recovery in remittances and a higher realisation of export proceeds, could cause the country's current account post a surplus in the coming months.

However, given that the petroleum sector now accounts for about 25 percent of the entire import bill, the rise in global crude oil prices poses a possible risk to imports.

Maintaining a current account surplus is essential for the economy, especially in light of the fact that the nation's reserves now cover imports for fewer than two months. A low-hanging fruit that should be picked by the authorities is enhancing the flow of remittances through efficient administrative measures.

In August, Pakistan's current account deficit was $160 million, down 79 percent from the same month last year. The current account deficit decreased by 79 percent month-on-month in August. In July, the nation experienced a $775 million deficit. The first two months of the current fiscal year saw a 54 percent reduction in the current account deficit, to $935 million. The deficit for the same time of the previous fiscal year was $2.035 billion.