From Zeeshan Mirza
KARACHI: The country’s foreign exchange reserves held by the State Bank of Pakistan (SBP) continued to decline on a weekly basis.
On July 22, the foreign currency reserves held by the SBP were recorded at $8,575.16 million, down $754 million compared with $9,328.6 on July 15, data released by the State Bank of Pakistan (SBP) on Thursday showed.
According to the central bank, the decrease came due to external debt and other payments.
Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $14,414.6 million. Net reserves held by banks amounted to $5,839.5 million.
It should be noted that with the current foreign exchange reserves position, Pakistan has an import cover of less than 1.5 month.
Meanwhile, the Pakistani rupee nosedived by Rs3.92 in a single day to hit an all-time low at Rs239.94 against the dollar in the interbank market Thursday; however, the SBP cannot smoothen the disorderly movement because of limited foreign exchange reserves position, as well as bindings of the International Monetary Fund (IMF) considerations.
However, with Pakistan reaching a staff-level agreement with the Fund foreign exchange reserves are expected to improve after the receipt of $1.17 billion from the global lender.
Emerging markets analyst Emre Akcakmak highlighted that Pakistan’s international reserves with the central bank continued to decline in the week ending July 22. “If [country] doesn’t receive Chinese loan, reserves would be $6.3 billion,” he warned.
Taking to his Twitter, the analyst said that pace of drawdown isn’t slowing. “It’s accelerating. Pakistani rupee weakening because this can’t go on forever,” he added.
Wednesday, Pakistan’s Current Account Deficit (CAD) — the gap between the country’s higher foreign expenditure and low income — widened to $2.3 billion in June 2022 despite higher exports and remittances.
According to the State Bank of Pakistan, the current account deficit of the country has risen to $2.3 billion in June 2022 compared to a deficit of $1.6 million in the same month of the last year.
Cumulatively for fiscal year 2021-22, the current account deficit widened by a whopping 517%, clocking in at $17.4 billion on a yearly basis when compared with the figure of $2.82 billion during FY21.
“As foreshadowed by earlier Pakistan Bureau of Statistics (PBS) data, a surge in oil imports saw current account deficit rise to $2.3 billion in June despite higher exports and remittances,” the central bank said on its official Twitter handle.
The SBP further mentioned that so far in July oil imports are much lower [and] “deficit is expected to resume its moderating trajectory.”
It mentioned that 3.3 million metric tons of oil was imported in June, 33% higher than in May.
“Together with higher global prices, this more than doubled the oil import bill from $1.4 billion to $2.9 billion,” the SBP said, adding that by contrast, non-oil imports ticked down.
Details of the balance-of-payments summary revealed that Pakistan recorded exports of goods at $3.12 billion and another $646 million as services. However, a massive import bill, which clocked in at $7.04 billion for goods and another $1.37 billion as services, in June was the reason behind the current account deficit.
It should be noted that the current account balance is an important indicator of Pakistan’s economy, a widening deficit leads to an outflow of US dollars, which has also taken a toll on the currency that is currently being traded at a historic low of Rs236.02 against the greenback.
