SBP’s foreign exchange reserves sink to three weeks’ worth of import cover

Pakistan’s foreign exchange reserves dropped $1.2 billion to $4.3bn as of January 6, the central bank said on Thursday, leaving the country with barely three weeks’ worth of import cover.

The drop was due to external debt repayments, the State Bank of Pakistan (SBP) said in a statement.

Net foreign exchange reserves held by commercial banks stood at $5.8bn, and total liquid reserves at $10.1bn, the bank added.

Despite recent compression measures by the government, Pakistan’s import bill for goods was $5.1bn per month in both November and December, according to the Pakistan Bureau of Statistics.

The main imports are critical energy-related fuels.

The country is currently in the midst of a severe cash crunch. The falling reserves have already deeply devalued the local currency against the US dollar and other major currencies.

Foreign debt servicing is the most troubling question for the PMLN-led coalition government facing a serious threat of default. Several attempts to restart talks with the International Monetary Fund (IMF) for the release of the next tranche have so far remained unfruitful.

However, earlier today the United Arab Emirates (UAE) agreed to roll over an existing loan of $2bn and give an additional loan of $1bn to Pakistan.