KARACHI: The State Bank of Pakistan (SBP) reported a significant drop in the official foreign exchange reserves by $399 million for the week ending April 3, 2020.
The central bank revealed this decline in its weekly update on Thursday, citing external debt repayments as the primary reason for the reduction in reserves.
The foreign exchange reserves held by the SBP fell from $11.185 billion to $10.722 billion during the specified week. According to the SBP, the decline of $463 million can be attributed to external debt repayments amounting to $465 million. This reduction underscores the challenges Pakistan faces in managing its external financial obligations, particularly amid the global economic uncertainties triggered by the COVID-19 pandemic.
In contrast, the foreign exchange reserves held by commercial banks increased slightly by $64 million, reaching $6.266 billion by the week ending April 3, 2020, compared to $6.202 billion in the previous week. While commercial banks’ reserves experienced a modest uptick, the overall reserves of the country witnessed a decline of $399 million, settling at $16.988 billion by the week ending April 3, 2020, compared to $17.387 billion a week earlier.
The decrease in the country’s foreign exchange reserves raises concerns about its ability to meet external financial obligations and maintain stability in the face of global economic challenges. The COVID-19 pandemic has disrupted economies worldwide, impacting trade, investment, and financial markets. As countries grapple with the economic fallout, managing external debt becomes a critical aspect of sustaining financial stability.
Pakistan, like many other nations, faces a delicate balancing act between addressing the health crisis caused by the pandemic and managing the economic repercussions. The decline in foreign exchange reserves emphasizes the importance of prudent financial management and strategic planning to navigate the uncertainties posed by the current global crisis.
The SBP’s acknowledgment of external debt repayments as a significant factor in the decline underscores the need for careful management of the country’s debt profile. Policymakers and financial authorities will likely focus on implementing measures to ensure the sustainability of external finances and safeguard the country’s economic resilience in the coming months.
While the COVID-19 pandemic continues to impact economies worldwide, the situation remains fluid, and governments must remain vigilant in their efforts to mitigate economic risks and support financial stability. The coming weeks and months will be crucial for Pakistan as it navigates through the challenges posed by the pandemic and seeks to maintain stability in its foreign exchange reserves amidst external debt obligations.
