Pakistan’s total foreign currency reserves, including reserves held by banks, decreased by 2% to $9.56 billion. The State Bank of Pakistan (SBP) announced that the central bank’s forex reserves have decreased by $170 million to $4 billion due to debt payments, which the institution called the “external front of the economy.” Although the current account deficit (CAD) has decreased significantly, the government is still facing difficulties in meeting the challenges.
The poor forex reserves have led to difficulties because the CAD levels fell to $3.86 billion compared to $12 billion last year in the first eight months of the current financial year. Pakistan has urged the International Monetary Fund (IMF) to release a tranche of $1.1 billion related to the ninth review, but the lender demanded that Islamabad arrange the $6 billion required to meet repayments within June-end 2023. Meetings between the IMF and the Pakistani government have been held, but a staff-level agreement is still awaited.
The total foreign currency reserves held by Pakistan, including reserves held by banks other than the SBP, amounted to $9.56 billion, a decrease of $195 million or 2% compared to the previous week. The net reserves held by banks accounted for $5.526 billion, indicating a decline of $26 million during the week.
The decreasing foreign currency reserves have put immense pressure on Pakistan’s economy, which heavily relies on imports. The central bank has implemented measures to reduce the current account deficit by limiting imports, but the shortage of foreign currency reserves has led to business closures and rising prices of imported goods, making it difficult for the general public to afford 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. However, Pakistan still needs around $6 billion to pay back its bilateral and multilateral loans, which include loans from donor agencies.
On Thursday, the Pakistani rupee (PKR) appreciated by PKR 1.71 in the interbank market and 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.