KARACHI: Pakistan’s foreign exchange reserves experienced a significant decline of $360 million during the week ending December 24, 2021, according to the State Bank of Pakistan (SBP). The drop in reserves highlights ongoing challenges in managing the country’s external accounts amid fluctuating global economic conditions.
Pakistan’s liquid foreign exchange reserves fell to $24.273 billion as of December 24, 2021, compared to $24.633 billion recorded a week earlier. This decline in Pakistan’s reserves reflects pressures on the national economy, which relies heavily on maintaining adequate foreign exchange reserves to support imports, stabilize the currency, and meet debt obligations.
A major portion of the reduction was observed in the SBP’s official foreign exchange reserves, which decreased by $298 million. As of December 24, these reserves stood at $17.855 billion, down from $18.154 billion a week earlier. The decline is attributed to external debt repayments and other financial obligations.
Commercial banks also saw a reduction in their foreign exchange holdings. Their reserves dropped by $61 million during the same week, settling at $6.418 billion compared to $6.479 billion the previous week. This underscores the need for a more robust inflow of foreign exchange to strengthen the banking sector’s position.
The overall Pakistan’s decline in foreign exchange reserves can pose challenges for Pakistan’s economic stability. Lower reserves may impact the country’s ability to import essential goods, finance development projects, and defend the Pakistani rupee against volatility in the global currency market.
Efforts to bolster foreign exchange reserves remain critical. Pakistan is exploring various measures, such as securing financial aid from multilateral institutions, encouraging remittances from overseas Pakistanis, and attracting foreign investments. These steps are essential to ensure a steady flow of Pakistan’s foreign exchange into the economy.
The SBP continues to monitor the situation closely, aiming to maintain stability and confidence in the country’s foreign exchange reserves. Policymakers emphasize the importance of prudent fiscal management to navigate these economic challenges effectively.
This trend in Pakistan reserves serves as a reminder of the intricate balance required to manage foreign exchange resources, ensuring they meet the demands of a growing economy while addressing external vulnerabilities.