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KARACHI: Foreign exchange reserves of both the State Bank and commercial banks fell during the week that ended on May 24.
The central bank said in a statement on Thursday that its reserves fell by $63 million to $9.093 billion, pulling down the reserves close to the edge of $9bn. Under an IMF condition, the reserves must not fall below the $9bn mark at the end of June.
The SBP said the dip in reserves was due to external debt repayments. Continued debt repayments could further dent the reserves.
Several bankers said, however, the SBP had been purchasing dollars from the inter-bank market to keep the reserves at $9bn.
Since the exchange rate has been stable of late, there has been no frantic purchase of dollars in the inter-bank market. Positive signs for the next IMF tranche have led to a comfort zone for the currency market.
The State Bank’s reserves are now sufficient for 1.75 weeks of import, which is not good, but comfortable enough due to four-month stability in the exchange rate.
The decline of $207 million in the reserves of commercial banks is significant as it brought down the total to $5.22bn. It was the lowest this month, May FY24.
The outgoing financial year, FY24, would end with some ease, particularly due to a very low current account deficit _ $202 million — in the 10 months of this fiscal year. Experts said, however, the next financial year could be more difficult since debt servicing would require $25bn. Pakistan is trying to negotiate about $7bn loans from the IMF, but the rest of the amount requires talks with friendly countries for rollover of their loans.
Experts believe that Pakistan would have to face a bigger trade and current account deficit in FY25. On the instructions of the IMF, the government has eased imports while exports are almost stagnant.
Published in Dawn, May 31st, 2024
