Foreign exchange reserves held by the State Bank of Pakistan (SBP) declined by $136 million to $6.904 billion in the week ending December 15, 2023, mainly due to the repayment of some external debt obligations.
The country’s total reserves, which include those of commercial banks, also fell by $138 million to $12.068 billion, the SBP said in a statement.
However, analysts said the country’s external outlook has improved significantly due to the International Monetary Fund’s (IMF) $3 billion loan program, which was approved in July. The loan has enabled Pakistan to secure funding from other sources, such as friendly countries and multilateral institutions.
The SBP has also been reducing its forward short positions, which are a measure of the central bank’s exposure to the foreign exchange market. The forward short positions have decreased by 47 percent since February, from $5.7 billion to under $3 billion as of October.
Pakistan has also been repaying its Eurobonds on time, which is vital for supporting the rupee and investor sentiment. The SBP said Pakistan has repaid $5.4 billion in debt during the current fiscal year, which includes $1.4 billion in interest payments and $4 billion in principal repayments.
Pakistan’s current account deficit, which is the gap between the country’s foreign income and expenditure, has also narrowed by 64 percent to $1.16 billion in the first five months of the fiscal year. The deficit was $9 million in November, the SBP said on Wednesday.
The improvement in the current account was helped by tighter fiscal and monetary policies, as well as administrative measures taken by the government that resulted in a declining trade gap.
