SBP asserts its foreign currency reserves have not gone dry

The State Bank of Pakistan (SBP) on Tuesday refuted claims suggesting that its foreign exchange reserves had “dried up” and emphasised that neither the country’s banks had run out of US dollars nor the central bank had suspended import payments.

The announcement from the central bank comes amid news of its reserves dropping to an alarmingly low level coupled with the suspension of import payments.

However, the SBP reported its foreign reserves were at $8.99 billion. “These do not include gold reserves, and are totally useful for all reasons.”

The central bank stated it had not suspended import payments and that commercial banks had adequate dollar liquidity to complete such payments.

“Import payments of roughly $4.7bn have been completed through the interbank market during the month so far,” the SBP noted.

Earlier, a Dawn report claimed anxiety and speculations that banks had stopped writing letters of credit (LCs) gripped the currency market

“State Bank has not blocked banks from making import payments. Even today, probably over $200m import payments have been executed,” SBP Chief spokesperson Abid Qamar said earlier in the day.

According to SBP, Pakistan’s reserves have decreased by another $234 million to close slightly below $15 billion. The central bank’s portion of these reserves is a little under $9 billion.

A day earlier, the local financial portal Tresmark reported that the exceedingly low levels of currency reserves aggravated the rupee’s pain.

“With nearly no free liquidity, it is believed that the central bank does not have the resources to manage the market,” it pointed out. “With low levels of inflows and considerable withdrawals, notably end of June, SBP is tapping into commercial bank’s share of reserves to make payments, resulting in low or negative swap premiums.”

Keeping this in mind, it went on. There was no preventing the rupee from receiving additional losses.

“On average, it (the market) is losing Re1 per day and will only cease when Pakistan receives fresh inflows. If we were to presume that influx will come from IMF, then the government should focus all its resources on having IMF on board and skip the line as we can not afford even another week [like this],” the overview continued.