KARACHI: Foreign exchange reserves have continued to deplete by a monthly average of $500 million for the past seven months, raising fears among currency dealers that the dollar could spiral out of control in the inter-bank market.

Despite rising import bill, the exchange rate has been stable in the inter-bank market for more than a year thanks to intervention by the State Bank of Pakistan (SBP) to contain the dollar’s rise. However, currency dealers believe the exchange rate could burst through the SBP-enforced ceiling if the reserves kept falling.

According to the latest SBP report, Pakistan’s forex reserves fell by $3.51 billion since October to $20.52bn on June 2. State Bank’s reserves dropped by $3.22bn to $15.7bn during the same period.

The current government brought down the dollar from Rs108-9 to Rs97 when it came to power four years ago. But it seems to have lost its grip now. For the last seven months, the government has failed to improve SBP reserves amid political turbulence.

Moreover, outflows have been swelling too, particularly the import bill which is likely to touch $50bn this fiscal year.

The outflow of profits and dividends by foreign companies operating in Pakistan could also touch $2bn by the end of the fiscal year; the amount repatriated by these firms already stood at $1.52bn during the 10 months through April.

Experts believe that the government will try its best to keep the exchange rate at the current level until the general election. Similarly, the government will also want to give forex reserves a boost.

However, repayments on borrowed money have started and are set to pick up pace in a couple of years. During the current fiscal year, the government would have to pay about $6bn as debt servicing on foreign loans; the amount will only increase each year with rising Chinese investments in the country.

“Despite fears about the future of the exchange rate, the open market is stable as supplies have increased during Ramazan,” currency dealer Anwar Jamal said.

Published in Dawn, June 11th, 2017