KARACHI: Foreign exchange reserves held by the State Bank of Pakistan (SBP) are eroding at a fast pace as the bank’s holdings decreased by over $1.5 billion within just two weeks.

The SBP data issued on Thursday showed the reserves declined sharply by $804 million to $11.185bn during the week ending Mar 27.

“This decline is attributed primarily to government’s external debt payments, that amounted to $441m and other official payments,” said the SBP in its weekly release. In the previous week, from March 13-20, the SBP reserves had fallen by $708m.

Independent economists have been suggesting the government to reschedule all external debts due to extraordinary situations emerging out of the coronavirus pandemic.

The pandemic has quashed any hopes for higher exports during the current fiscal whereas risk-averse foreign investors are dumping their investments in the country as fast as possible. Bankers claim the outflows from the country’s equity and bond markets are unlikely to stop in the current situation.

In addition, business circles as well as bankers see no hope for foreign direct investment inflows as Pakistan is currently the least favorite FDI destination in the south Asian region.

Meanwhile, the government is also planning to borrow $4bn in the wake of weakening of the economy. Bankers believe the move will be counterproductive and simply increase the debt servicing costs.

During the two weeks, commercial bank holdings increased by $139m to $6.202bn. The country’s total foreign exchange reserves fell by $1.356bn to $17.387bn during the same period.

Published in Dawn, April 3rd, 2020