KARACHI: The foreign exchange reserves held by the State Bank of Pakistan (SBP) continued its declining spree witnessing a minor outflow of $15 million to $6.70 billion during the week ending Dec 9 compared to a whopping $784m drop recorded in the preceding week, announced the central bank on Thursday.

The critical condition of SBP’s reserves was obvious from the fact it declined by $11bn during a year. In Dec 2021, the central bank’s reserves were $17.686bn which now stood at $6.7bn.

According to the central bank data, the SBP reserves were last recorded below this level during the week ended on Jan 18, 2019, when it had some $6.64bn.

Senior bankers deplored that the prolonged political and economic instability was taking the entire country towards a place of no return.

“How within six months, the two finance ministers of the same government are contradicting each other giving a serious message of disbelief to the stakeholders of the economy,” said a senior banker.

Delay in IMF talks hampering ‘inflows’ from friendly countries

Miftah Ismail has been advocating for all possible measures to bring IMF back to the table while Finance Minister Ishaq Dar recently said he was not going to accept any dictation from the global moneylender.

This approach delayed the talks with IMF by two months and the country could not receive the next tranche of $1.12bn.

This rapid decline in the reserves is the main reason for the rupee’s massive devaluation giving fuel to fears of the country’s possible default against foreign debt repayments amid poor foreign investments.

However, the interbank dollar rate remained unchanged at Rs224.71 on Thursday.

The economy fell from bad to worst in the last six months while it eroded the purchasing capacity of common Pakistanis with record inflation of 25pc in FY23.

“We are just hoping for inflows from friendly countries or IMF and other lending institutions. The inflows could help us to avoid default,” said a senior banker.

However, the SBP governor was definite about the country’s capacity to pay back the entire $23bn dues for FY23. Mr Miftah recently said there was no other option except to go back to IMF, the lender of last resort to save Pakistan from default.

Analysts said the inflows from friendly Arab countries were estimated at $6bn but no talks with the IMF are delaying the expected inflows.

The foreign exchange reserves of the country were also hit by poor inflows of remittances and declining exports.

The country’s overall reserves stood at $12.570bn including $5.870bn held by commercial banks.

Published in Dawn, December 16th, 2022