By Staff Reporter
KARACHI: Foreign exchange reserves have fallen to $3.09 billion, its lowest levels since February 2014, after paying off some of the country’s external debt, the central bank said on Thursday.
Total liquid foreign reserves held by the country stood at $8.74 billion. Net foreign reserves held by commercial banks stood at $5.65 billion.
“During the week ended on January 27, 2023, SBP’s reserves decreased by $592 million to $3,086.2 million due to external debt repayments,” the State Bank of Pakistan said in a statement.
The reading covers less than three weeks of imports.
Brokerage Arif Habib Limited said the current reserves are enough for import cover of “fewer than 0.61 months (approximately 18 days)”.
The low levels have raised a red flag as the country looks for additional multibillion-dollar financial support packages from friendly countries to shore them up. Pakistan is in dire need of funds to cover its current account deficit and debt obligations, for which it needs more than $30 billion in external financing this financial year.
Remittances and exports, two main components of dollar inflows in the country, fell sharply in recent months on a slowdown in the global economy.
Pakistan’s ninth review of staff-level talks with the IMF for the release of its next tranche started just two days back after a delay of almost five months on differences on several issues. The IMF program requires Pakistan to implement strict economic reforms as well as withdraw all subsidies.
Separately, finance minister Ishaq Dar on Thursday allowed a charity organization to voluntarily raise around $2 billion in debt to support the national exchequer.
Addressing a gathering on the Islamization of economy, Dar told the chairman of Saylani Welfare International Trust, Bashir Farooqui, he was free to generate money from overseas Pakistanis by utilizing his network. However, he said all the transactions must be kept transparent.
“The transactions must be transparent and well documented and the money must be raised under the defined procedures,” the minister said while participating in the gathering through a video link from Islamabad.
Farooqui had sought permission from Dar to generate the required amount during the course of the program.
“The debt will be raised for five years and will be interest-free,” he said. “The collected amount will be handed over to the government.”
Meanwhile the currency fell 0.93 percent, or 2.53 rupees, setting a new record low on Thursday. The rupee ended at 271.36 per dollar, weaker than the previous close of 268.83 in the interbank market. In the open market, the rupee lost 50 paisas to settle at 275.50 versus the greenback.
“Uncertainty on timing of dollar inflows affecting local currency,” said Mohammed Sohail of brokerage Topline Securities.
The rupee has breached the 270 level versus the dollar. Wednesday saw a modest decline, although the prior session saw a recovery. Last week, Pakistan eliminated an artificial cap on the rupee, which led to a 17 percent decline in value against the dollar up to Monday.
Analysts said demand for dollars is higher as a lot of import consignments were piled up at the ports.
“The IMF negotiations are on their way. No uncertainty until now. As the currency is Investment, any day in which demand is greater than supply, the parity moves higher,” Tariq added.
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