June 02, 2022 (MLN): The total liquid foreign exchange reserves held by the country declined by $378 million or 2.3% WoW to stand at the lowest level of $15.77 billion, the lowest since November 22, 2019, during the week ended on May 26, 2022, compared to $16.14bn in the previous week, weekly data released by the State Bank of Pakistan (SBP) on Thursday showed.

The data further revealed that reserves held by the central bank during the week moved down by $365mn or 3.76% WoW to clock in at the lowest level of $9.72bn, the lowest since December 06, 2019, mainly due to external debt payments.

Similarly, the reserves of commercial banks dropped by $12.7mn or 0.20% WoW to $6.04bn.

Meanwhile, it is important to note that, the current level of foreign currency reserves is barely enough to cover 1.43 months of imports.

Outlook:

Though the current status of foreign exchange reserves is quite depressing, the reserves will see a notable improvement in days to come as Pakistan will shortly receive $2.3bn from China.

According to Federal Minister for Finance and Revenue, the terms and conditions for refinancing of around $2.3bn deposit by Chinese banks have been agreed.

Inflow is expected shortly after some routine approvals from both sides. This will help shore up our foreign exchange reserves, he added.

Meanwhile, the rupee-dollar parity is improving on the back of the government’s decision to roll back fuel subsidy to comply with IMF conditionality. During the 5-day winning streak, the local unit has recovered from its lowest levels by Rs4.37 against USD.

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