Forex reserves fall to $16.149bn, lowest since Dec 2019

KARACHI: Pakistan foreign exchange reserves fell to $16.149 billion in the week that ended May 20, their lowest level since December 2019, on external debt payments, central bank data showed on Thursday.

The reserves fell by $11 million or 0.1 percent.

The reserves held by the State Bank of Pakistan (SBP) decreased $75 million to $10.088 billion. The SBP attributed a decline in the reserves to external debt repayments. The SBP’s latest reserves are enough to cover 1.48 months of imports.

However, the reserves of commercial banks rose 1.1 percent to $6.061 billion.

Analysts said the government move to partially withdraw subsidies on petroleum products to obtain the release of funds from the $6 billion bailout IMF package would help bolster the battered economy and also forex reserves.

“The latest move will pave the way for the disbursement of the next tranche of $900 million,” an analyst said. “The government has finally met the prerequisite of the IMF loan by rolling back billions in fuel subsidies and easing strain on public funds.”

A soaring twin deficits (current account and trade), lack of foreign currency inflows, and increasing foreign debt servicing obligations led to the fast depletion of the forex reserves. The falling reserves put pressure on the currency, which hit record lows for the last 12 sessions.

Higher global commodity prices amid Russia-Ukraine conflict and dwindling foreign reserves are putting pressure on the current account as well as the local unit.

The resumption of the stalled IMF programme will unlock funding from other bilateral and multilateral lenders, easing pressure on the balance of payments and improving the value of the rupee against the dollar, analysts added.

However, they feared that the balance of payments crisis could worsen further soon if the government fails to arrange foreign assistance quickly to foster the forex reserves as current inflows are not enough to meet the importer requirements.