SBP’s Forex Reserves Plunge by $415 Million Due to Rising External Debt

The foreign reserves held by the State Bank of Pakistan (SBP) fell week-over-week by $415 million (2.2 percent) to $18.15 billion, mainly due to external debt repayments. According to the data released by the State Bank of Pakistan (SBP), the foreign exchange reserves decreased to $18.15 billion in the week. The total liquid foreign reserves held by the country stood at $24.63 billion, down by $395 million, as of 17 December 2021. During the week, the foreign exchange reserves of commercial banks stood at $6.47 billion. In retrospect, the Pakistani Rupee is struggling to stay resolute against the US dollar. Although the local unit managed to halt the exchange spillover as various economic indicators consolidated in the past 24 hours, the weight of expectations suggests that pressure will persist for the next few months due to little movement in commodity prices. Moreover, if the current account deficit remains between the $1.5-2 billion bracket during the period in question, the exchange rate could go through more hoops of fire, and so will the reserves held with the central bank. Historically, SBP’s reserves soared to a record high of $20.15 billion in August after the International Monetary Fund directed Special Drawing Rights worth $2,751.8 million to the former. However, the SBP’s reserves began to decline steadily during the same month, which it attributed to the fulfillment of debt repayments and other related regulations.