SBP-held foreign exchange reserves drop to 8-year low

The foreign exchange reserves held by the State Bank of Pakistan (SBP) continued their declining spree, plunging by $584 million to reach $6.1 billion as of December 16.

According to SBP, this is the lowest level of reserves since April 2014.

SBP’s reserves have decreased by $11.6 billion over the past 12 months. The central bank’s reserves, which were $17.7 billion in December 2021 and are now at $6.1 billion, hardly cover a month’s worth of imports.

Pakistan’s total liquid foreign reserves are currently $12 billion, with $5.9 billion of that amount held by commercial banks as net foreign reserves.

The lack of foreign assistance along with a delay in the IMF program’s revival, a greater trade imbalance, and rising foreign debt payments severely depleted the reserves.

The Fund’s criticism over an elevated budget deficit is said to be the reason why the ninth review discussions have been postponed.

While the IMF urges that the government must stabilize the economy, the government seems unwilling to levy more taxes in order to raise income.