SBP’s forex reserves fall to near 3-year low of $7.4bn

KARACHI: The State Bank of Pakistan’s (SBP) foreign currency reserves fell to their lowest level in almost three years at $7.83 billion as of August 5 from $8.385 billion a week earlier on debt payments, data from the central bank showed on Thursday.

The foreign reserves held by the State Bank of Pakistan dropped by $555 million or 6.6 percent on a weekly basis due to increased debt payments and a lack of external financing.

The central bank’s data showed reserves plunged to their lowest level since October 2019.

Pakistan’s total liquid foreign reserves fell by $648 million or 4.6 percent to $13.561 billion and those of commercial banks dropped 1.6 percent to $5.730 billion.

The reserves available with the SBP are enough to cover little over a month’s imports.

The SBP, in a statement, said the reduction in the reverse was due to external debt payments.

“Debt repayments are expected to moderate during the next three weeks of this month,” the central bank said. “In fact, around three-fourth of debt servicing for the month of August was concentrated during the first week.”

The latest forex reserves numbers came as the country is facing dried external funding with the reserves depleting fast amid a stalled $6 billion International Monetary Fund programme.

However, analysts see the resumption of the IMF programme and the expected lower current account deficit amid falling imports to help shore up dwindling foreign reserves.

With almost all conditions of the IMF met, IMF’s $1.2 billion tranche after a delay of a few months will be released after board approval which is expected by August end, according to a research note from Topline Securities.

The staff level agreement was reached on July 13 and Pakistan met prior actions related to energy tariff adjustments, rise in taxes, and petroleum levy. This would help secure funding from other sources and friendly countries.

“Funding gap for FY2023 is now estimated at $32.2 billion including debt repayment of $23.5 billion which is much lower than earlier estimates due to lower than expected current account,” the report said.

“Resultantly, rollover risk will reduce especially for $1 billion of Eurobond and $4 billion of the commercial loan in FY2023 as reliance on commercial borrowing may not be needed.”