KARACHI: The State Bank of Pakistan’s (SBP) foreign exchange reserves reached a two-month high of $8.857 billion on Thursday with the inclusion of $1.16bn from the International Monetary Fund under the Extended Fund Facility (EFF).

The SBP said it received proceeds of $1.16bn (the equivalent of SDR 894 million) under the EFF on Aug 31, which would be included in SBP’s FX reserve position for the week ending Sept 2.

However, the SBP went on to add that its foreign exchange reserves had further decreased by $113 million during the week ended Aug 26.

The declining foreign exchange reserves remained a serious threat to the external account of the economy during the entire previous fiscal year (FY22), which ended on June 30.

The foreign exchange reserves of the State Bank fell by 61.6 per cent as it lost $12.376bn during the last 12 months. In August 2021, the SBP reserves were $20.073bn, which fell to $7.697bn in August this year.

The huge loss of foreign exchange resulted in extreme destabilisation of the exchange rate and the local currency’s devaluation by 31pc against the US dollar. With fluctuations in the rates, the dollar reached a record high of Rs239.5 on July 28.

With the inclusion of $1.16bn from the IMF, the foreign exchange reserves of the country’s state bank reached $8.857bn on September 1, which was two months high. In July, the reserves were $8.38bn while they were $9.816bn in June.

Since the country recorded a huge current account deficit of $17.4bn in FY22, it needs about $35bn during the fiscal year FY23 for debt servicing and other payments attached to the international liabilities.

Published in Dawn, September 2nd, 2022