Foreign Reserves
The State Bank of Pakistan (SBP) reported a decrease of $239 million in its foreign exchange reserves on a weekly basis, bringing the total to $8.896 billion as of June 21, according to data released on Thursday. This decline is attributed to external debt repayments, as stated by the central bank.
Overall, Pakistan’s total liquid foreign reserves, which include holdings by both the SBP and commercial banks, amounted to $14.207 billion. Of this, net foreign reserves held by commercial banks stood at $5.311 billion.
The SBP noted the impact of external debt obligations on its reserves, highlighting the financial pressures faced by the country.
“During the week ended on 21-June-2024, SBP reserves decreased by US$ 239 million to US$ 8,895.8 million due to external debt repayments,” the central bank stated. This drop comes in stark contrast to the previous week’s performance, where the SBP reserves had seen an increase of $31 million.
In May, there was a significant boost in the SBP’s foreign reserves, which surged by $1.114 billion, pushing the total above $9 billion for the first time in nearly two years.
This increase was primarily due to the receipt of the final tranche of $1.1 billion from the International Monetary Fund (IMF) as part of its $3 billion Stand-By Arrangement with Pakistan.
The IMF’s financial assistance played a crucial role in bolstering Pakistan’s dollar reserves, reflecting the importance of international support in maintaining the country’s economic stability.
The receipt of these funds provided a temporary relief, helping to stabilize the financial markets and improve investor confidence.
However, the recent decrease in reserves underscores the ongoing challenges Pakistan faces in managing its external debt and maintaining sufficient foreign currency reserves.
The fluctuation in reserves is a clear indicator of the delicate balance the SBP must maintain between repaying debts and ensuring adequate reserve levels to support the country’s economic needs.
The central bank’s efforts to manage these reserves are critical in maintaining economic stability, particularly in the face of external financial pressures.
As Pakistan continues to navigate its economic challenges, the role of international financial institutions like the IMF remains pivotal in providing the necessary support to sustain the country’s economic health.
In summary, while the increase in reserves in May marked a positive development, the recent decrease highlights the continuous struggle to balance debt repayments with the need to maintain robust foreign exchange reserves.
The SBP’s ability to manage these reserves effectively will be crucial in navigating the economic uncertainties and ensuring long-term financial stability for Pakistan.
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