Pakistan’s forex reserves drop by $136 million

KARACAHI: Pakistan’s total foreign exchange reserves fell to $12,068.4 million as of December 15, 2023, according to the latest data released by the State Bank of Pakistan (SBP).

The decline was mainly due to debt repayments of $136 million that reduced the SBP’s reserves to $6,904.8 million.

The foreign reserves held by commercial banks remained stable at $5,163.6 million. The foreign reserves are a key indicator of the country’s ability to pay for its imports and service its external debt.

Pakistan faces economic crisis amid low reserves

The drop in foreign reserves comes at a time when Pakistan is facing a severe economic crisis amid currency depreciation, inflation, and fiscal deficit.

The country’s rupee has lost more than 40% of its value against the US dollar since January 2022, reaching a record low of 305 in August 2023.

The inflation rate soared to 26.9% in November 2023, eroding the purchasing power of the people.

The fiscal deficit has widened to 9.8% of GDP in the first quarter of the fiscal year 2023-24, exceeding the target of 6.3% set by the government.

The country’s external debt has also increased to $130 billion, equivalent to 55% of GDP, as of September 2023.

Pakistan seeks IMF bailout to avoid default

To avoid a default on its sovereign debt repayment, Pakistan has been seeking a bailout package from the International Monetary Fund (IMF) since October 2023.

The IMF has demanded Pakistan to implement structural reforms, such as increasing tax revenue, reducing subsidies, and tightening monetary policy, as conditions for the loan.

The IMF has also expressed concern over the transparency and sustainability of Pakistan’s debt, especially the loans from China under the China-Pakistan Economic Corridor (CPEC) project.

The CPEC is a $62 billion infrastructure and energy project that aims to link China’s western region with Pakistan’s southern port of Gwadar.

Pakistan hopes that the CPEC will boost its economic growth and create jobs, but critics say that it will increase its debt burden and dependence on China.

The IMF has urged Pakistan to share the details of the CPEC contracts and repayments with the international community, and to ensure that the project is aligned with its national development goals.