KARACHI: The State Bank of Pakistan’s (SBP) foreign exchange reserves fell by an additional $54 million in a single week, making the exchange rate more vulnerable.
With a $63 million decline recorded last week, this is the central bank’s second consecutive decline in reserves, underscoring disparities in dollar inflows and outflows.
The SBP keeps reserves at a specific level by routinely buying dollars from the interbank currency market. By the end of fiscal year FY24, the SBP’s reserves are expected to have grown to $9 billion, according to the International Monetary Fund (IMF).
Even at $8 billion, the inflows are not enough to keep reserves stable. The next $1.2 billion tranche from the IMF, according to some analysts in the banking sector, would help the SBP boost its reserves, but this would only be a temporary boost as the $6 billion loan repayment is still outstanding. The government has been trying to borrow money, but because of the current political and economic unrest, the foreign market is not interested in buying Pakistani bonds.
The entire country reserve as of March 1st was $13.020 billion, with the SBP reporting reserves of $7.895 billion and commercial banks holding $5.124 billion.
The SBP’s declining reserves did not cause a negative reaction in the currency market, despite the dollar’s pressure on the exchange rate leading to a modest increase in the value of the Pakistani rupee.
Over the course of three working days, the dollar prices continued to rise, but on Thursday, the PKR showed some signs of improvement. Given that the dollar sold for Rs279.29, up from Rs279.35 the previous day, the PKR gained six paise.
