Karachi, July 25, 2024 – The State Bank of Pakistan (SBP) announced on Thursday a significant drop of $397 million in its official foreign exchange reserves for the week ending July 19, 2024. The reserves declined from $9.424 billion on July 12, 2024, to $9.027 billion by the end of the week.
The SBP attributed this decline to external debt payments made by the Pakistani government. The overall foreign exchange reserves of the country also saw a reduction, falling by $369 million to $14.335 billion compared to $14.704 billion in the previous week, the SBP added.
Interestingly, the foreign exchange reserves held by commercial banks showed a slight improvement. They increased by $28 million, reaching $5.308 billion by July 19, 2024, up from $5.28 billion a week earlier, the SBP said.
Pakistan is currently grappling with significant pressure on its external sector due to high debt repayments. However, there is a silver lining. The country recently entered into a Staff-Level Agreement (SLA) with the International Monetary Fund (IMF). This agreement is a step toward securing an extended fund facility of $7 billion, which is expected to provide some relief to the struggling economy.
The decline in foreign exchange reserves has raised concerns about Pakistan’s ability to meet its external obligations. Analysts believe that the country needs to strengthen its foreign exchange reserves to stabilize its economy. The IMF agreement is seen as a crucial step in this direction, as it will not only provide much-needed funds but also boost investor confidence.
The SBP’s efforts to manage the foreign exchange reserves are critical in maintaining economic stability. The central bank has been taking measures to ensure that the reserves are used judiciously, focusing on essential imports and debt repayments.
In the face of these challenges, the Pakistani government is expected to implement further economic reforms to improve the country’s fiscal situation. The IMF’s extended fund facility is likely to come with conditions that will require Pakistan to undertake structural reforms, enhance revenue collection, and reduce fiscal deficits.
The coming weeks will be crucial for Pakistan as it navigates through these economic challenges. The government’s ability to manage its external debt and improve foreign exchange reserves will be vital in stabilizing the economy and ensuring sustainable growth.
With the IMF agreement in place, there is hope that Pakistan will be able to weather this storm and emerge stronger. The focus now shifts to the implementation of the agreed-upon reforms and the effective management of foreign exchange reserves to achieve long-term economic stability.