KARACHI: The country’s foreign exchange reserves fell sharply over $1.5 billion in the first three weeks of January and reached below the $23 billion mark mainly due to massive external debt servicing.
According to the State Bank of Pakistan (SBP) statistics, the country’s total liquid foreign exchange reserves stood at $ 22.482 billion as of January 21, 2022 down from $ 24.019 billion as of December 31, 2021, depicting a decline of 6 percent or $1.537 billion.
During the period under review, reserves held by the SBP and commercial banks witnessed a downward trend, however a major decline was recorded in the SBP’s reserves due to foreign debt payments.
SBP’s reserves decreased by $ 1.5 billion in the first three weeks of January. Foreign exchange reserves held by the SBP dropped to $ 16.19 billion mark in the third week of January 2022 compared to $17.686 billion at the end of December 2021. According to SBP, the downfall in foreign exchange reserves was due to external debt and other payments.
During the last week ended on January 21, 2022, SBP reserves decreased by $846 million due to debt and other official payments.
Similarly, with some $41 million declined, net foreign reserves held by commercial banks stood at $ 6.29 billion as of January 21, 2022.
Currently, the country’s external account is under pressure as the current account surplus was turned into the deficit during the first six months of this fiscal year because of a massive surge in goods import bill. The current account posted a $9 billion deficit in July-Dec of FY22 compared to a $1.247 billion surplus in the same period of last fiscal year.
Looking ahead, SBP is expecting that the current account deficit is likely to decline through the remainder of FY22, as import growth may slow in response to a normalization of global commodity prices. However, the deficit could be larger if global commodity prices take longer to normalize.
Dr Reza Baqir Governor SBP, in its recent press conference on Monetary Policy claimed that Pakistan has sufficient foreign exchange reserves to finance the current account deficit, even if the commodity prices in the world market will not declined.
The country is also making efforts to revive the $6 billion loan programme with the International Monetary Fund (IMF) to build the depleting foreign exchange reserves. Recently, Pakistan took a number of measures to meet the IMF conditions and the country is hopeful that the IMF board will resume the loan program in the next meeting.
It may be mentioned here that the country’s imports rose to $40.6 billion, up around 66 percent, with energy imports and Covid vaccines accounting for more than half the rise. Although exports also recorded some growth, it’s less than the surge in imports. Exports grew by nearly 25 percent to reach $15.1 billion during the first half of the fiscal year.