SBP forex reserves hit lowest since November 2019

KARACHI: The State Bank of Pakistan’s (SBP) foreign exchange reserves have dropped by $241 million or 2.6 percent to $9.0 billion as of June 10, central bank data showed on Thursday, hitting their lowest level since November 2019 on the back of lack of external financing amid stalled IMF programme, high payments for oil imports, and pressure on foreign debt.

Overall forex reserves (FX) held by the country fell to $14.9 billion from $15.2 billion previously, worsening a balance of payment crisis as uncertainty persists about revival of the International Monetary Fund (IMF) bailout package.

The reserves available with SBP are enough to cover less than two months of imports.

Investors’ fear that Pakistan’s declining reserves will make it difficult for the country to pay for its imports and external debt payments unless the government secures a loan from the IMF has dragged on the local currency, which hit another record low against the dollar in a fourth consecutive session of this week.

The strengthening of the US dollar against major world currencies following an aggressive monetary tightening by Fed Reserves to tame-sky-high inflation also hit sentiment on the rupee.

“Falling FX reserves are putting pressure on PKR,” said Mohammed Sohail, CEO at Topline Securities.

“IMF staff-level agreement may provide some support to local currency,” Sohail added.

The rupee closed at a fresh all-time low of 207.67 to the dollar in the interbank market. It ended at 206.46 on Wednesday. The local unit weakened by 1.50 rupees to close at 209.50 versus the greenback in the kerb market.

“Uncertainty concerning IMF, lower export proceeds, and oil payments are reasons for the persistent slide in the rupee,” said Tahir Abbas, the head of research at Arif Habib Limited.

Pakistan’s currency is one of worst performers in the world as it has depreciated by 14.57 percent against the dollar this year, data compiled by Ismail Iqbal Securities showed.

It’s not the rupee that has tumbled and underperformed its regional peers and various global currencies, but other ones are taking a beat. Pak rupee and Japanese yen fell almost equally against the dollar this calendar year to date. The yen declined by 13.34 percent.

The local unit is one of the 15 currencies that have lost ground. The Sri Lankan rupee has been the worst-performing, plummeting 43.9 percent, with the Laotian Kip battering 24 percent, Turkish Lira 23.18 percent, and Ghana Cedi 22.33 percent, respectively, the data revealed.