KARACHI: The rupee plunged to a historic low of Rs183.70 against the US dollar in the interbank market after the State Bank of Pakistan (SBP) reported a massive outflow of $2.9 billion on Thursday.

The SBP announced that its foreign exchange reserves dropped to $12.047bn during the week ended on March 25 due to a major repayment of Chinese loans while the rest was regular debt servicing. “This decline reflects repayment of external debt including a major syndicated loan facility from China,” said the SBP.

The SBP did not mention the specific figure as repayment to Chinese syndicated loans. However, media repo­rts suggested that the SBP had repaid $2.4bn to China.

“The rollover of this syndicated facility is being processed and is expected shortly,” said the SBP, adding that the amount is expected to come back in the reserves after completion of the rollover process.

Foreign Minister Shah Mehmood Qureshi, who is in China, said that his Chinese counterpart had assured him that Beijing has agreed in principle for granting rollover of $2.4bn in commercial loans to Pakistan.

The SBP reserves have been falling since August 2021 despite $2bn inflows from IMF and sukuk proceeds. The foreign exchange reserves of the SBP have fallen by $8.026bn to $12.047bn from $20.073bn in August 2021. It was the lowest since October 2020.

The political crisis in Pakistan resulted in outflows of foreign investments in the domestic bonds which weakened the local currency. About $387m from the Pakistan Investment Bonds and treasury bills left Pakistan in March alone.

Pakistan borrowed heavily from China during the last three years to meet its foreign obligations while the previous debts of the Paris Club and other financial institutions have already burdened the economy.

The increasing growth in imports created a wide trade deficit which ultimately resulted in over a $12bn current account deficit, so far, in FY22. Currency experts and dealers said the situation had further deteriorated due to the growing uncertainty on the political front.

The dollar climbed to Rs183.70 but closed the session at Rs183.48 in the interbank market. The SBP has been trying to keep the market cool by allowing the dollar to appreciate gradually.

“The rupee is plugging fast due to encashment of portfolio investment. Moody’s comments on increased vulnerability due to political uncertainty accelerate the fall,” said currency analyst Eman Khan of Tresmark.

The country’s overall reserves fell to $18.554bn while the holdings of the commercial banks were $6.507bn during the week.

Published in Dawn, April 1st, 2022