In the week that concluded on December 30, 2022, the State Bank of Pakistan’s (SBP) foreign exchange reserves fell to a level not seen in eight years, totaling $5.576 billion.
Finance Minister Ishaq Dar is optimistic that the rapidly declining SBP reserves may be reversed with the anticipated financial assistance provided by the friendly countries, although nothing has been realized thus far.
For the discharge of external debt, the SBP’s foreign exchange reserves lost $245 million over the week.
The most concerning issue for the coalition government led by the PMLN that faces a real default risk is how to service foreign debt. There have been several unsuccessful attempts to pick up the conversation with the IMF about releasing the following tranche.
The local currency has already been significantly undervalued in comparison to the US dollar and other major currencies due to the declining reserves. The SBP’s foreign exchange reserves decreased by $11 billion, from $16.6 billion in January 2022 to $5.6 billion now.
Due to this drastic drop, the government was unable to repay its international debts without taking out new loans from allies.
Only three weeks’ worth of imports will be covered by the SBP’s reserve stocks.