Karachi, August 3, 2023 – Pakistan’s foreign exchange reserves experienced a decline, reaching $13.464 billion by the week ending on July 27, 2023, as reported by the State Bank of Pakistan (SBP) on Thursday.
The country’s foreign exchange reserves fell by $70 million from the previous week’s level of $13.534 billion, which was recorded on July 21, 2023. The decrease in reserves was primarily driven by a $32 million drop in foreign exchange reserves held by the SBP, reaching $8.154 billion by the end of the week, compared to $8.186 billion a week earlier. Meanwhile, commercial banks also saw a decline in their forex reserves, which amounted to $5.31 billion, falling by $38 million from the previous week’s level of $5.348 billion.
This recent decrease in foreign exchange reserves follows a notable increase in the previous week, mainly attributed 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.
It is worth noting that the current level of foreign exchange reserves is 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.
The SBP attributes the decline in foreign exchange reserves to the government’s efforts to reduce 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.