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Pakistan's forex reserves dip to $7.2 billion amid debt repayments

EditorHari G
Published 11/23/2023, 10:05 PM
© Reuters.

ISLAMABAD - Pakistan's foreign exchange reserves have witnessed a significant decline, with the State Bank of Pakistan (SBP) reporting a substantial drop in central bank forex reserves. The SBP's reserves fell by $217 million, reaching a new low of $7.180 billion as of November 17, largely due to ongoing debt repayments and challenges in the external financing environment.

This decrease comes despite previous financial support including a $3 billion IMF stand-by arrangement received in July and aid from Saudi Arabia and UAE. The total national reserves, which include commercial banks' holdings, were down by $233 million, standing at $12.302 billion after commercial banks' reserves decreased by $17 million to $5.122 billion.

The reduction in reserves is attributed to increased import payments and a lack of fresh inflows, prompting Pakistan to face volatile financial dynamics and reassess its future investment strategies under economic pressures. The country is also grappling with an expanding current account deficit, driven by heightened import volumes in October.

However, there is an anticipation of financial relief on the horizon for Islamabad. The IMF executive board is expected to approve a crucial tranche worth $700 million under its stand-by arrangement in early December following a positive initial review. This potential funding boost is part of an anticipated injection of close to $1.2 billion from international financial institutions such as the World Bank and Asian Development Bank ahead of the new year. Additional monetary assistance from Gulf partners is also projected.

In light of these developments, Roshan Digital Account deposits have surpassed the $7 billion mark, buoyed by ongoing contributions from overseas Pakistanis even after a slowdown following an increase in NPC rates. Despite the current account challenges, experts maintain that fiscal deficits should remain within manageable limits due to the expected inflow of foreign funds and continued support from the IMF.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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