From Zeeshan Mirza
KARACHI: Pakistan’s foreign exchange reserves held by the State Bank of Pakistan (SBP) continued to fall for the third week in a row, declining by 3.83%.
On October 7, the foreign currency reserves held by the SBP were recorded at $7,596.9 million, down $303 million compared with $7,899.8 on September 30, data released by SBP showed on Thursday.
Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $13,246.8 million.
Net reserves held by banks amounted to $5,649.9 million. The central bank cited external debt repayment, including interest payments on Eurobonds and repayment of a commercial loan, as a major reason behind the decline.
With the current foreign exchange reserves position, Pakistan has an import cover of fewer than 1.09 months.
Criticising the policymakers, former planning minister and PTI leader Asad Umar said: “We have lost more than half the reserves which were there when [the] no-confidence motion was filed.”
“The crises continue to deepen as [the] government [is] too busy getting their corruption cases wound up,” he tweeted. A critical level of reserves has caused severe pressure on the Pakistani rupee with the local unit.
The rupee had gained some ground as Ishaq Dar assumed charge as the new finance minister, a development that helped the currency market recover. The Pakistani currency was at the cusp of a fresh historic low; however, Dar’s arrival gave the market much-needed clarity.
The excessive supply of dollars in the market helped the rupee to stage a 13-day-long rally. However, the supply of foreign currency decelerated after the sluggish data on worker remittances.
The drop in inflows changed sentiment in the interbank market and encouraged importers to buy dollars at the prevailing rate before it became expensive. The local unit extended losses for the second day Thursday and closed at 218.38.
Pakistan’s economy faces serious challenges due to fast-decreasing foreign exchange reserves and political instability.
Foreign exchange reserves are decreasing by $300-400 million on weekly basis due to an increase in imports and have fallen below $8 billion, which is an alarming situation.
