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SBP’s Foreign Exchange Reserves Plunge to 8-year low

Pakistan registered a 67% or $11.864 billion decline in foreign reserves. SBP’s Foreign Exchange dropped from $17.686 billion to just $5.822 billion in the calendar year 2022.

Total liquid foreign reserves held by the SBP stood at $11.71 billion. Net foreign reserves held by commercial banks stood at $5.89 billion.

“During the week ended on Dec 23, 2022, SBP’s reserves decreased by $294 million to $5.82 billion due to external debt repayment,” said the SBP.

At the beginning of the year 2022, the country’s total reserves were $23.883 billion. Now by the end of the year (till Dec 23), the reserves fell to $11.7 billion.

Pakistan saw a huge decline in its foreign reserves in just one year due to political instability. This is the lowest level of SBP reserves since April 2014. The rapid decline of foreign reserves raises concerns about Pakistan’s liquidity position.

Many factors and policy flaws lead Pakistan to this situation. The huge import bill with skyrocketing energy and fuel prices resulted in the continuous depletion of reserves in the country. The ban on imports and non-essential items also badly hit local industries.

The exports and remittances also showed a consistent drop due to the global economic slowdown. To make the situation worse the smuggling of dollars increased in the last quarter of 2022.

Pakistan’s domestic and geopolitical situation also kept foreign investors away from the country.

However, Finance Minister Ishaq Dar repeated on 29 Dec 2022, “ There is no chance that Pakistan will default”. On the other hand, he admits that country’s economy will remain in a “tight spot”.

“Conditions are tight, but Pakistan will move forward. Pakistan will not default,” he said. “I admit that we do not enjoy the same level of foreign exchange reserves ($24 billion) we left back in 2016. But that is not the government’s fault, the fault is in the system and we must ensure that every stakeholder takes part in carrying the country forward.”

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