A currency trader counts Pakistani Rupee notes as he prepares an exchange of US dollars in Islamabad, Pakistan (Image: Reuters/Representative)
Pakistan’s total foreign currency reserves, including net reserves held by banks, stood at $9.56 billion, indicating a 2% decrease from the previous week
Pakistan central bank’s forex reserves have further dwindled by $170 million as is currently at $4bn, the State Bank of Pakistan (SBP) said on Thursday. The SBP pointed out that the reserves dwindled due to debt payments, which the institution termed as “external front of the economy”.
The current account deficit (CAD) has seen a steep drop but the government is facing difficulties to meet the challenges. Poor forex reserves continue to create impediments because the CAD levels fell to $3.86bn against $12bn last year in the first eight months of the current financial year.
Despite Pakistan urging the International Monetary Fund (IMF) to release a tranche of $1.1bn related to the ninth review, the lender demanded that Islamabad arrange the $6bn required to meet the repayments within June-end 2023.
Several meetings have been held between the IMF and the Pakistani government but a staff-level agreement is still awaited.
The total foreign currency reserves held by Pakistan, including net reserves held by banks other than the SBP, amounted to $9.56 billion, registering a decrease of $195 million or 2% compared to the previous week.
Out of the total foreign currency reserves, the net reserves held by banks accounted for $5.526 billion, indicating a decline of $26 million during the week.
The diminishing foreign currency reserves have put immense pressure on the Pakistani economy that heavily relies on imports.
While the central bank has implemented measures to reduce the current account deficit by limiting imports, the shortage of foreign currency reserves has led to shutting down of businesses. The prices of imported goods have risen and the general public faces difficulties in affording basic necessities.
Pakistan is also set to make major payments on international bonds. The nation is expected to pay $167 million on April 15 and October and a $1 billion payment due in April 2024 when the bonds mature.
These are only payments for international bonds, but Pakistan still needs around $6 billion to pay back its bilateral and multilateral loans, which include loans from donor agencies.
The Pakistani rupee (PKR) on Thursday appreciated by PKR1.71 in the interbank market. It appreciated by PKR 3.52 against the US dollar. In the open market, the dollar was traded at PKR 292, down from PKR 294 the previous day.
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