ISLAMABAD: In the latest data, the State Bank of Pakistan has revealed that the liquid foreign reserves of Pakistan have dropped by another 592 million over the last week to a dangerously low level of 3.09 billion. This is the lowest level of reserves that Pakistan has been at in more than the last 8 years. But more importantly, this is the lowest that Pakistan’s foreign reserves can get.
In the last 20 years, Pakistan was at its lowest level of foreign reserves in November 2013, when the foreign reserves touched the dangerously low level of $3.05 billion. Just last week Pakistan’s foreign reserves dropped by $923 million to $3.67 billion.
Even though this might not be the lowest ever point in the history of Pakistan in terms of numbers. Pakistan faces a situation much more dire than 2013. Despite having a poor economic outlook and foreign reserves Pakistan has to fulfill international debt obligations, greater than its limited reserves, to avoid default.
Experts suggest that after the recent devaluation of the rupee, Pakistan’s import cover is now less than 20 days. With the total imports in both December and January ranging close to $5 billion, Pakistan is in dire need of forex reserves now more than ever.
The IMF team is currently in talks with the Ministry of Finance for the fund’s 9th review of its Extended Fund facility. These talks have been stalled since September 2022.
Despite floating the exchange rate to its true market value as per IMF’s prior conditions, Pakistan has not been able to realize forex inflow in the form of remittances and export proceeds.
The low reserves also continue to put pressure on the Pakistani rupee which closed upwards of 271 on Thursday. This is the lowest the rupee has ever been against the greenbacks.