Muhammad Soban

The foreign exchange reserves held by the State Bank of Pakistan (SBP) further plunged by $106 million and dipped to $7.9 billion on September 30, 2022, WealthPK reports. According to data released by the central bank, the total foreign reserves of Pakistan in liquid are $13.59 billion. Commercial banks hold $5.69 billion in net foreign reserves.

Currently, the SBP’s foreign reserves are enough to cover imports for only 1.13 months. In a statement, the SBP pointed out that the decline in foreign reserves is a result of the payment of interest on Eurobonds, which were part of the external debt repayment process.

In September, the SBP received a tranche of $1.2 billion from the International Monetary Fund (IMF), which has helped to build foreign reserves and kept the economy from plunging into a full-blown recession by averting the threat of default.

Pakistan has been desperately seeking the inflow of dollars to meet its balance-of-payments needs. In July, the rupee experienced its worst monthly performance in over 50 years due to a low level of reserves.

Despite the resumption of the IMF financial assistance programme for Pakistan, its reserves are depleting rapidly. Financial analysts and experts believe that the expected multilateral and bilateral flows of money following the recent devastating floods in Pakistan will relieve pressure on its foreign exchange reserves.

They expect that the foreign reserves of the country will reach $16 billion by the end of the financial year 2023 after receiving additional funding. However, Pakistan will have to adhere to the agreement with IMF by taking reformative steps.

Analysts say that the resumption of the IMF loan programme for Pakistan and additional funding from other countries will not only improve its trade balance but also increase its foreign exchange reserves.

According to a report of the Pakistan Bureau of Statistics, the trade deficit of Pakistan fell by 31% on year-on-year basis and reached $2.88 billion in September.

The export of different items from the country also witnessed a slight decrease of one percent in September and dipped to $2.39 billion from $2.41 billion in the previous month. However, the import of goods from other countries dropped by 20% on year-on-year basis and reached $5.27 billion. Compared to the previous financial year, the trade deficit in the first quarter of the current fiscal narrowed by 21.4% and reached $9.2 billion.

According to the experts, Pakistan should work on structural reforms of the economy for sustainable development. The only way to get out of the economic crisis is to increase exports and reduce imports, they told WealthPK.

Credit : Independent News Pakistan-WealthPk