KARACHI: The foreign exchange reserves, held by the central bank, continued to descend for the fifth consecutive week, dropping 3.84% on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
The falling reserves raise concern over Pakistan’s ability to meet its financing requirements. Earlier, Saudi Arabia provided $2 billion in financial assistance to Pakistan, which pushed the reserves above $8 billion, but later they started falling again.
Moreover, the third $1-billion loan tranche from the kingdom is expected to arrive next month. Separately, China and the United Arab Emirates (UAE) have agreed to provide much-needed support for the fast depleting reserves. On Thursday, the UAE released the first assistance tranche of $1 billion.
On January 18, the foreign currency reserves held by the SBP were recorded at $6,636.1 million, down $265 million compared with $6,901.2 million in the previous week. The decrease was attributed to external debt servicing and other official payments. UAE formalises $3b deposit into SBP to support Pakistan’s economic growth
Overall, the liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $13,257.2 million. Net reserves held by banks amounted to $6,621.1 million.
In November last year, Chinese Embassy Deputy Head of Mission Zhao Lijian assured Pakistan of a financial package to boost its flagging foreign currency reserves, hinting that it would be bigger than that pledged by Saudi Arabia.
China also agreed to immediately give a loan of $2 billion to Pakistan, a move meant to provide much-needed breathing space to the new government.
Earlier, the reserves dipped to $9.06 billion, forcing the central bank to let the rupee depreciate massively for the fourth time since December 2017 and sparking concern about the country’s ability to finance a hefty import bill as well as meet debt obligations in coming months.
In April, the SBP’s reserves increased $593 million due to official inflows. A few months ago, the reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF) earlier.
In January last year, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.
