Pakistani foreign exchange reserves held by the State Bank of Pakistan (SBP) fell another $190 million, reaching an alarming level of $8.39 billion during the week ended on July 29, 2022, as economic policymakers in the country continued to scramble over securing dollar inflows. Data released by the SBP on Thursday said total liquid forex reserves held by the country stood at $14.21 billion. Net forex reserves held by commercial banks clocked in at $5.82 billion.
Pakistan’s Forex Reserves Are in Critical Position Requiring Dollar Inflows
“During the week ended on 29-Jul-2022, SBP’s reserves decreased by $190 million to $8,385.4 million due to external debt and other payments,” said the SBP. Last week, forex reserves held by the central bank had declined by $754 million. The reserves’ position is critical for Pakistan which is desperately seeking dollar inflows to meet its balance-of-payments needs. A low level of forex reserves has caused severe pressure on its currency market with the rupee witnessing its worst monthly performance in July in over 50 years.
It required a combination of an improvement in Pakistan’s trade deficit, export proceeds as well as IMF’s recent statement on the country’s successful completion of all prior actions to halt a slide that saw the rupee close in on the 240 level in the inter-bank market. On Thursday, the rupee appreciated closing near the 226 level.
Low Level of Reserves Have Resulted in Severe Pressure in Currency Market
Earlier in the week, Resident Representative of the IMF, Esther Perez, stated that all prior actions for the combined 7th and 8th review have been met. He mentioned that the board meeting is tentatively planned for late August once “adequate financing assurances are confirmed.” The dangerously low level of reserves has resulted in severe pressure on the country’s currency market with July proving to be the rupee’s worst month since 1989.