Cash-Strapped Pakistan's Forex Reserves Slump To Lowest Level Since December 2019

Cash-strapped Pakistan's foreign exchange reserves have dropped to their lowest level since December 2019, owing to an increase in current account and trade deficits, higher external debt payments and dried dollar inflows, according to a media report on Friday.

According to data released by the State Bank of Pakistan (SBP), the central bank of the country, inflows clocked in at $16.4 billion in the week ending 6 May, from $16.5 billion a week earlier.

The country’s reserves declined by $178 million or 1.1 percent on a week-on-week basis to stand at $16.376 billion, the central bank data showed, reports The News International.

The central bank reserves also fell to a 23-month low, decreasing by $190 million to $10.308 billion.

According to the report, analysts estimate that SBP's latest reserves can cover imports for 1.54 months.

The reserves of commercial banks, however, rose to $6.067 billion from $6.054 billion.

Increasing twin deficits -- the current and trade deficits, lack of foreign currency inflows, and increasing foreign debt servicing obligations led to the fast depletion of the forex reserves.

The delay in the revival of the International Monetary Fund (IMF) bailout along with the lack of pledges of funding from friendly countries is adding pressure to the foreign reserves and the local unit.

(With inputs from PTI)