Karachi, November 2, 2023 – Pakistan’s foreign exchange reserves have witnessed a significant decline of $78 million in just one week, according to a report released by the State Bank of Pakistan (SBP) on Thursday.
The country’s foreign exchange reserves dropped to $12.577 billion by the week ending October 27, 2023, down from $12.655 billion the previous week, which ended on October 20, 2023.
This decline highlights a noteworthy shift, as Pakistan’s foreign exchange reserves have significantly dwindled from their peak level, which was recorded in August 2021 when they reached a robust $27.2 billion.
The current significant drop in reserves has raised concerns about Pakistan’s ability to meet its import requirements effectively and maintain the stability of the Pakistani rupee in the international currency market.
The official reserves held by the State Bank of Pakistan did see a slight increase, going up by $14 million to reach $7.508 billion by the week ending October 27, 2023, up from the previous week’s level of $7.494 billion. However, the foreign exchange reserves maintained by commercial banks experienced a more significant decline, dropping by $92 million to reach $5.069 billion compared to $5.161 billion a week ago.
The declining foreign exchange reserves are a matter of grave concern for Pakistan’s economic stability, as they play a crucial role in ensuring the country’s ability to cover its import bills, manage its external debt obligations, and maintain the exchange rate of the Pakistani rupee.
The depleting reserves are attributed to various factors, including Pakistan’s growing import bill, particularly in the energy sector, and the ongoing global economic uncertainties. Rising oil prices and inflationary pressures have intensified the import burden on the nation’s foreign exchange reserves.
Moreover, the COVID-19 pandemic’s prolonged impact on the global economy has disrupted trade and reduced remittances, which are essential sources of foreign exchange for Pakistan. Additionally, Pakistan’s economic challenges have led to a decline in foreign direct investment and an increase in the country’s reliance on loans and aid packages.
The SBP and the government have been actively working to address this issue by implementing various economic and financial reforms. Measures have been taken to boost exports, encourage overseas remittances, and attract foreign investment. However, the results of these efforts are yet to be seen in the country’s foreign exchange reserves.
The decrease in foreign exchange reserves comes at a time when Pakistan’s economy is grappling with several challenges, including high inflation, fiscal deficits, and sluggish economic growth. Maintaining an adequate level of foreign exchange reserves is crucial to ensure the country’s economic stability and financial security.
