Karachi, June 22, 2023 – Pakistan’s foreign exchange reserves have experienced a significant decline, dropping by $514 million over the past week, according to the State Bank of Pakistan (SBP).
As of June 16, 2023, the reserves stand at $8.864 billion, down from $9.378 billion on June 9, 2023.
Despite a substantial reduction in the current account deficit during the first eleven months of the current fiscal year, Pakistan continues to face challenges on the external front. The continuous fall in foreign exchange reserves poses a threat to the country’s repayment capabilities.
READ MORE: Pakistan’s Foreign Exchange Reserves Increase by $43 Million
It is noteworthy that Pakistan achieved an all-time high in foreign exchange reserves, reaching $27.228 billion by August 27, 2023. However, since then, the country has experienced a sharp decline, with reserves dwindling to $18.364 billion.
Similarly, the SBP’s official reserves recorded a decline of $482 million, reaching $3.537 billion by June 16, 2023, compared to $4.019 billion a week earlier.
READ MORE: SBP’s Foreign Exchange Reserves Plummet to $3.912 Billion, Below One-Month Import Cover
However, the current level of foreign exchange reserves held by the SBP remains below the recommended benchmark of at least three months’ worth of import cover. In May 2023, Pakistan’s import bill amounted to $4.275 billion, as reported by the Pakistan Bureau of Statistics (PBS).
The surge in the import bill for May 2023, a notable increase of 43% compared to $3 billion in April 2023, can be attributed to the government’s decision to lift restrictions on opening Letters of Credit (LCs) for import payments.
The SBP attributes the decline in official reserves to external debt repayment. However, it stated that during the current week, it received $300 million in proceeds from the Government of Pakistan (GoP) commercial loan. These inflows will be incorporated into the reserves position to be published as of June 23, 2023.
READ MORE: Pakistan Economic Survey 2022-23: Restrictions Impede Manufacturing Growth
The falling foreign exchange reserves raise concerns about Pakistan’s ability to meet its financial obligations and maintain stability in its economy.
