Forex drops to $4.3 billion, a 9-year low

Depletion of Forex currency is due to the repayment of external debt.

KARACHI: According to data issued by the State Bank of Pakistan (SBP) on Thursday, the central bank’s Forex exchange reserves decreased by 22.1% week over week.

SBP’s foreign exchange holdings were valued at $4,343.2 million on January 6, 2023, down $1,233 million from $5,576.5 million on December 30.

The SBP claims that the reduction in reserves was brought on by the repayment of external debt.

The total amount of the country’s liquid foreign exchange reserves, which also includes the net reserves held by banks other than the SBP, was $10,187.8 million. The total amount of net reserves held by banks was $5,844.6 million.

Details indicate that the pressure of external payments is what is causing the foreign reserves to steadily decline. Foreign exchange reserves decreased by $1.223 billion in the past week as a result of repaying loans taken out from various Arab banks.

Pakistan anticipates receiving assistance from friendly nations and donors following the recent Geneva Convention, notably the United Arab Emirates (UAE), Saudi Arabia, and China, which will help Pakistan’s Forex exchange reserves.

Earlier, as Pakistan paid off some of its external debt in the week that ended on December 23, the SBP’s reserves fell by $294 million to $5,821.9 million.

Fewer than enough to cover five weeks of imports, according to research firms, the reserves have fallen to their lowest level since April 2014, a more than eight-and-a-half-year low. A minimum of three months’ worth of imports should be covered by the nation’s reserves.

As the International Monetary Fund’s (IMF) loan program is delayed, there is a shortage of US dollars on the domestic market. Investors are worried about Pakistan’s capacity to pay its foreign debt obligations as reserves are quickly declining.

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