The State Bank of Pakistan reported on Thursday, a whopping drop of $479 million in the foreign exchange reserves. The amount held by the Central Bank was recorded to be at $19,543.4 million on September 17, but was observed to have dropped by 2.4 from previously being $20,022.7 million on September 10.
The bank elaborated that “The decrease came on the back of external debt repayments,”.
Total liquid foreign currency reserves which also comprise of net reserves being held by other banks were recorded to be at $26,402.6 million. Net reserves amounting to $6,859.2 million are being held by banks in the country.
Foreign exchange reserves are of great importance to Pakistan, as it requires the dollar-stock to pay for its imports. Pressure on the dollar reserves rises as the government works towards a rising economic growth which further increases the current account deficit consequently eroding the central bank’s reserves.
Previously on August 24, funded by the International Monetary Fund (IMF) the general allocation of Special Drawing Rights (SDRs) contributed $2,751.8 million to the foreign exchange reserves which rose to a record high amount of $20.15 billion on August 27.
Governor of the SBP, Raza Baqir had said that recently approved SDR allocation has come about at the best possible time as Pakistan seeks improving economic growth in FY 2021.
He added that “The import cover will also increase with this new allocation,”.
The program implemented on August 23 was approved by the executive board of IMF back in mid-July. The SDRs were allocated to the member countries based off of their IMF quota. In total, the developing countries were to receive about $275 billion out of which Pakistan received $2.77 billion.
Earlier on July 9 2019, IMF initially provided a loan tranche worth $991.4 million followed by the second loan tranche of nearly $454 million in late December 2019, effectively boosting the reserves held by Pakistan.
As a result of inflows from various lenders which also include the Asian Development Bank (ADB) that provided $1.3 billion, the reserves surpassed the $10 billion mark in December of 2019.
In order to strengthen the foreign exchange reserves held by the Central Bank, lucrative interest rates were provided to lenders which led to Pakistan borrowing $2.5 billion via Eurobonds earlier in March 2021.
Another inflow of $2.5 billion from China contributed to the foreign exchange reserve. The State Bank of Pakistan was successful in making its foreign debt repayment worth $1 billion on the maturity of Sukuk, in 2020.
As a result of inflows from various lenders which also include the Asian Development Bank (ADB) that provided $1.3 billion, the reserves surpassed the $10 billion mark in December of 2019.
