Foreign exchange: SBP’s reserves plunge 3.34% to $9.88b2 min read

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KARACHI:  In a worrying development, the foreign exchange reserves held by the central bank decreased 3.34% on a weekly basis, according to data released on Thursday.

On August 31, the foreign currency reserves held by the State Bank of Pakistan (SBP) were recorded at $9,885.1 million, down $341.6 million compared with $10,226.7 million in the previous week.

The reserves have once again fallen below the $10-billion mark, raising concerns over the country’s ability to meet its financing requirements.

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The decrease was attributed to external debt servicing and other official payments.

Also Read: Foreign exchange: SBP’s reserves slip by $8.1m to $10.23b

Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,369.7 million. Net reserves held by banks amounted to $6,484.6 million.

A month ago, China reportedly agreed to immediately give a loan of $2 billion to Pakistan, a move meant to arrest the slide in foreign currency reserves and provide much-needed breathing space for the new government.

Of the agreed amount, $1 billion had already been transferred to the central bank account. According to officials in the Ministry of Finance, the loan will be categorised as official bilateral inflow.

Also Read: Foreign exchange: SBP’s reserves increase $82.2m to $10.23b

Earlier, the reserves had dipped to an alarmingly low level of $9.06 billion, forcing the central bank to let the rupee depreciate massively on four separate occasions since December 2017 and sparking concerns about the country’s ability to finance a hefty import bill as well as meet debt obligations in coming months.

In April, the SBP’s reserves had increased $593 million due to official inflows.

A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).

In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.

(This news/article originally appeared in The Express Tribune on September 7th, 2018)

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