KARACHI: The market players that include importers were astonished that in 38 days (September 6 to October 14), the country’s foreign exchange reserves fell by $1.076bn.
The falling trend of reserves caught speed since January this year when it started slipping from $13.635 billion to $9.230bn on October 14.
The alarming issue, however, was the falling reserves of the State Bank while the reserves of the private banks have been increasing slowly.
The reserves of the State Bank witnessed a net loss of $4.618bn since January 2013 while the private banks improved their foreign exchange holdings to $5.144bn on October 14 from $4.941bn.
How fast foreign exchange reserves of the country flushed out since January was visible from the State Bank’s report that showed a loss of over $4 billion during nine months.
While this depletion of reserves during the period drastically devalued the local currency, it deepened the crisis which forced the government to request for emergency loan from the IMF.
According to the SBP report issued on Thursday, the foreign exchange reserves of the country till October 14 were $9.230 billion while the holdings of the State Bank were just $4.086bn.
The government can use only the dollar reserves with the State Bank while the holdings of private banks could not be used as per the law made in the beginning of the last decade. The reserves of the private banks were higher by more than $1bn to $5.144bn compared to the State Bank’s holdings.
The impact of this massive fall in the reserves was multidimensional as it inflicted the entire economy. The massive erosion of rupee value and increased cost of imports were two major victims of the poor and weak reserves.
However, the grave impact of this fall surfaced on State Bank’s another report issued on Wednesday that showed the country’s current account deficit which sharply increased by $1.2 billion in just three months of the current fiscal.
The deficit widened despite increased remittances during this period. The overseas Pakistani sent remittances worth $3.927bn during the first quarter giving extraordinary support to the current account balance but it kept widening.
Pakistan has received $320 million from United States as coalition support fund on Monday while it assured to release some of $1.6bn military and civil aid provided the US congress approves the proposed aid for Pakistan.
Analysts said the US aid and support is positive sign for the country’s weak health of the reserves but the widening current account deficit could have greater negative impact on economy.