Pakistan’s foreign exchange reserves further dropped by $294 million to $5.8 billion, the lowest level recorded in eight years, according to the report issued by the State Bank of Pakistan (SBP).
The central bank’s foreign exchange reserves declined by $294 million to $5.8 billion due to external debt repayment, reaching the lowest level since April 2014.
This means the country has only enough reserves to cover one month of imports.
The country is going through a crucial time as the reserves are not enough to facilitate its huge foreign debt and the recent forex situation made it even more difficult for the country to repay its external debts.
While, Finance Minister Ishaq Dar, keeps on insisting that Pakistan will not default, the on-ground realities hardly support his claims.
Foreign exchange reserves of SBP have been continuously falling since the beginning of FY23, thus the specialists, contrary to the finance minister’s statement, paint a gloomy picture of the economic situation of Pakistan as they believe that the country is close to default.
The fear of default is also evident from the exchange rate instability, which has eroded the value of the local currency against all the major currencies, particularly the US dollar.
A US dollar, which was sold at Rs180 in April, traded at Rs226 in the inter-bank market on Thursday. Yet, the greenback has almost vanished from the open market over the last couple of months. Worse, a grey market has emerged due to the shortage of the American dollar which is offering a dollar for Rs260 to Rs270, against the inter-bank rate of Rs226.
The central bank’s data show that forex reserves are $11.7 billion out of which $5.9 billion is with the commercial banks.
In April, when the Imran Khan-led PTI government was replaced by the Shehbaz-led PDM government, the reserves stood at $10.5bn compared to $5.8bn on Dec 23.
The trend of a sharp decline in the inflows of remittances during the first five months of FY23 compared to the same period last year also contributed to the dropping of forex reserves, as inflows amounted to $12 billion this year against $13.3 billion last year.
The poor economic growth has also slashed foreign direct investment in the country as it recorded a decline of 51 per cent, receiving just $430 million during July-Nov FY23, compared to $885m in the same period last year.