Thursday Feb 09, 2023
The State Bank of Pakistan (SBP)-held foreign exchange reserves fell below $3 billion to a nine-year low as the cash-strapped nation faces hurdles in shoring up its economy amid a stalled International Monetary Fund (IMF) programme.
The coalition government is desperately trying to unlock the IMF deal, with the lender's mission in Islamabad to negotiate the terms for resuming the Extended Fund Facility (EFF), which will pave for Pakistan to get more than $1 billion from the institution.
In a statement, the central bank said, as of the week ended February 3, its foreign exchange reserves slipped to $2,916.7 million after a fall of $170 million due to external debt payments — enough to provide an import cover of 0.58 months.
The net forex reserves held by commercial banks stand at $5,622.9 million, $2.745 billion more than the SBP, bringing the total liquid foreign reserves of the country to $8,539.6 million, the statement mentioned.
The government and the SBP were banking on friendly countries, including Saudi Arabia, to help boost the reserves; however, none of the nations has so far delivered on its commitment — leaving Pakistan in a critical position.
As a result of the depleting foreign exchange reserves, imports have been hit hard as commercial banks are reluctant in opening letters of credit (LCs), making it next to impossible for businesses to stay afloat.
Major automobile makers — Indus Motors and Pak Suzuki Motors Company — have repeatedly stopped their car production due to an inventory crunch that's been created due to a liquidity crunch.
The rupee has also fallen to historic lows as the market faces a scarcity of dollars and the grey market is persistently active, but the local currency has gained some ground versus the dollar during the last two trading days as the market is hopeful of the revival of IMF deal today (Thursday).
In this regard, Finance Minister Ishaq Dar said earlier today that talks with the multilateral lender were "on track" and the government would share "good news" on the matter.
"I am going to meet the IMF mission. The final round of talks with the Fund is currently underway," the minister told reporters in Islamabad. "Talks are on track and we will share good news today. There are no differences with the IMF team."