The foreign exchange reserves of the State Bank of Pakistan (SBP) persist in their downward trajectory, dipping to $4.38 billion during the week ending May 5, according to central bank data revealed on Thursday.
The SBP’s weekly bulletin attributed this $74 million decrease to payments toward external debt. Additionally, commercial banks held net reserves amounting to $5.61 billion, roughly $1.23 billion less than the SBP’s reserves. This brings the nation’s total liquid foreign reserves to about $10 billion.
Pakistan’s foreign reserves have plummeted in recent months, landing at a critically low level. The current reserves barely cover a month’s worth of imports, a situation unchanged as the nation grapples with a severe balance of payments crisis.
A warning from Moody’s Investor Service earlier this week indicated that Pakistan could face default without an International Monetary Fund (IMF) lifeline, given its “Very weak” foreign exchange reserves.
Since November, the government has been negotiating with the IMF to obtain a $1.1 billion installment. However, the crucial staff-level agreement (SLA) remains unsigned despite the government’s assertion of meeting all IMF prerequisites.
Resuscitating the stalled loan program would bring in the desperately needed funds to stave off default and pave the way for financing from other multilateral institutions.
In the meantime, the government has clamped down on imports to curb dollar outflow, leading to a current account surplus of $654 million in March – the highest since February 2015.
However, these import restrictions have caused several businesses across diverse sectors to scale back or halt operations due to inventory shortages and problems with opening letters of credit (LCs).
The rupee has plunged to an all-time low against the US dollar, closing at Rs298.93, as low reserves and ongoing political upheaval stoke fears of further delay in securing the IMF deal.
