The country’s total liquid foreign exchange reserves fell sharply by $844 million in a week, mainly due to external debt payments.

According to State Bank of Pakistan’s (SBP) weekly report issued on Thursday, the total liquid foreign exchange reserves held by the country stood at $ 21.44 billion as of March 18, 2022 compared to $22.283 billion on March 11, 2022.

During the period under review, the SBP’s foreign exchange reserves moved downward and reached below the $15 billion mark, while the reserves held by the commercial banks rose slightly.

During the week ended on March 18, 2022, SBP’s foreign exchange reserves decreased by $ 869 million to reach $ 14.962 billion as against $15.832 billion a week earlier due to external debt and other payments.

Net foreign reserves held by commercial banks increased by $25 million to stood at $ 6.477 billion at the end of last week.

The country’s foreign exchange reserves are continued to weaken due to higher external debt servicing and other official payments. The government is also making efforts to build the depleting foreign exchange reserves with the support of international financial institutions and issuance of bonds in the international market.

The current account deficit declined sharply 78 percent to $545 million during the month of February 2022 compared to $2.53 billion in January 2022.

The decrease in current account deficit is in line with SBP’s expectation. The governor SBP Dr. Reza Baqir is confident that the country’s financing requirements like current account gap and the upcoming debt repayments will be fully met by the available financial flows and foreign exchange reserves.

The government has mobilized $ 1.0 billion from the issuance of Eurobonds of various tenors during the first quarter of this fiscal year to build the foreign exchange reserves.

In addition, Roshan Digital Accounts and Naya Pakistan Certificates (NPCs) also attracted healthy foreign inflows amounted to $3 billion since the launching. With approval from the IMF board, an amount of over one billion dollars was arrived under the Extended Fund Facility program of $6 billion in addition to $ 3 billion deposits from the Saudi Fund for Development during this fiscal year.

These inflows, coupled with the available multilateral and commercial financing allowed the SBP to easily make the debt repayments. Significant increase in the foreign exchange earnings and the continued build-up of foreign exchange reserves improved the solvency and liquidity position of external debt during the quarter.

The story was originally published in Business Recorder on March 25, 2022.