ISLAMABAD: As the forex reserves of Pakistan’s central bank decreased by $782 million to a four-year low of $6.7 billion during the week that ended Dec. 2, a financial expert on Friday said the country needed to employ efforts on a “war footing basis” to manage the crisis.
The State Bank of Pakistan’s (SBP) data showed that it was only left with liquid foreign exchange reserves worth 6.7 billion during the week that ended on December 2. The central bank’s net reserves with other banks remained at $5.867 billion, bringing the country’s total reserves to $12.58 billion.
The last time the central bank’s reserves were this low was on January 18, 2019, when it had some $6.64 billion in reserves.
The South Asian nation is already undergoing a financial crunch, largely aggravated by the unprecedented floods that affected more than 33 million people. Results from a damage assessment survey estimated that the deluges have cost the country more than $30 billion in damages.
“Pakistan’s forex reserves have fallen to a critical level that can only cover one month of imports,” Tahir Abbas, head of research at Arif Habib Limited, a Pakistani security brokerage firm, told Arab News.
“The government needs to manage the foreign exchange reserves on a war footing basis by expediting the process to complete the impending review of the International Monetary Fund (IMF),” he added.
He added that the completion of the IMF review will not only help inflows from the global money lender, but also from other multinational lenders.
Abbas said to meet the deficit, the government is also trying to arrange $4.2 billion from Saudi Arabia under an emergency relief package, including $3 billion in deposits and $12 billion worth of oil on deferred payments.
“In addition, the government needs to stop the bleeding on the Current Account Deficit (CAD) because the country has to run the CAD at a minimum side,” Abbas said.
The IMF review for the release of Pakistan’s next tranche of funding has been pending since September, which has left the country in dire need of external financing.
Islamabad has said all targets for the IMF review have been completed and that withholding a tranche despite that would not make sense.