Karachi, July 27, 2023 – Pakistan’s foreign exchange reserves experienced a significant decline of $530 million for the week ended July 21, 2023, according to a report by the State Bank of Pakistan (SBP).
The country’s total foreign exchange reserves now stand at $13.534 billion, compared to $14.065 billion recorded a week earlier on July 14, 2023.
The recent drop in foreign exchange reserves comes after a notable increase in the previous week, thanks to inflows from the International Monetary Fund (IMF) and other friendly countries. However, the repayment of foreign debt has exerted downward pressure on the reserves, offsetting the gains made in the earlier period.
The current level of foreign exchange reserves is now significantly lower than the peak level achieved in August 2021, when the reserves reached a robust $27.2 billion. This sharp decline raises concerns about Pakistan’s ability to effectively meet its import requirements and maintain stability for the Pakistani rupee in the international currency market.
Official data from the State Bank of Pakistan indicates that the central bank’s foreign exchange reserves also experienced a considerable decline of $541 million during the same period. The official reserves stood at $8.186 billion by the week ended July 21, 2023, compared to $8.727 billion recorded just a week earlier.
The SBP attributes the decline in foreign exchange reserves to the government’s repayment of external debt. While reducing foreign debt is a positive sign for the country’s long-term financial health, the current repayment obligations have put significant pressure on the reserves, leading to the observed decline.
In light of the decrease in foreign exchange reserves, it becomes crucial for Pakistan to explore measures to further bolster its reserves. Adequate reserves are essential to support the country’s economic stability and ensure a favorable exchange rate for the Pakistani rupee in the international market.
The government and financial authorities may consider implementing policies aimed at attracting foreign investment, boosting exports, and enhancing foreign remittances to increase foreign exchange inflows. Additionally, prudent debt management strategies can help in mitigating the impact of debt repayments on foreign reserves.
It is vital for Pakistan to address this economic challenge promptly to safeguard its financial stability and maintain investor confidence. As global economic conditions remain uncertain, maintaining an adequate level of foreign exchange reserves becomes all the more critical to weather potential economic shocks and ensure sustained growth in the country.