Pakistan Forex Exchange Reserves drop to critical level of $8.4-bn

New Delhi Oct 5  According to data released by the State Bank of Pakistan (SBP), the total liquid foreign reserves held by the country stood at $14,893.2 million on September 28, 2018.

Foreign reserves held by the SBP stood at $8408.50 million, showing a 6.95 per cent decline (or $627.70 million) from the week ended earlier on September 19, 2018, when the reserves held by SBP stood at $9036.20 million.

The continued drop in the reserves raises concerns about Pakistan’s ability to meet its financing requirements as the reserves have fallen even below the $8.5-billion level.

Talks with the International Monetary Fund had been going on to discuss terms for a possible bailout. The Fund has suggested to Islamabad to raise interest rates to double digits and let the currency weaken by at least 15% more in the current fiscal year.

The decrease was attributed to payments on account of external debt servicing.

A month ago, China 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.

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