The country’s foreign exchange reserves fell drastically by some $3 billion in a week mainly due to repayment of a syndicated loan facility from China.

According to the weekly foreign exchange reserve report issued by the State Bank of Pakistan (SBP), the total liquid foreign exchange reserves held by the country declined 13 percent and reached below the $19 billion mark during the last week. The country’s liquid foreign exchange reserves stood at $ 18.555 billion as of March 25, 2022 compared to $ 21.44 billion as on March 18, 2022, showing a declined $2.88 billion.

During the period under review, reserves held by the SBP moved downward, while banks’ reserves recorded some improvement. During the week ended on March 25, 2022, SBP reserves decreased by $ 2.915 billion to $ 12.047 billion down from $14.962 billion. Net foreign reserves held by commercial banks stood $ 6.507 billion, up by $30 million in a week.

According to SBP, this decline (in SBP’s reserves) reflects repayment of external debt, including repayment of a major syndicated loan facility from China. However, the SBP is expecting this loan will be rolled over as negotiations are under way. “The rollover of this syndicated facility is being processed and is expected shortly,” SBP added.

Pakistani authorities have recently made a fresh request for the rollover of a syndicated facility to reduce the pressure on the external account and foreign exchange reserves. Foreign Minister Shah Mehmood Qureshi is currently visiting China and as per reports China has agreed in principle to rollover loan facilities for Pakistan.

The country’s foreign exchange reserves have been under pressure since the beginning of this calendar year due to massive external debt servicing. During the first months of this calendar year, the country’s total foreign exchange reserves decreased by $5.4 billion to $18.554 at the end of March 2022 compared to $24.019 billion as on December 31, 2022.

The federal government is continually making efforts and looking for several opportunities to build the depleting foreign exchange reserves. The government is trying to reschedule the foreign debts, increase the remittances, exports and foreign direct investment to maintain the reserves at a sustainable level.

The country’s current account deficit contained at $545 million, down 78 percent during the month of February 2022 compared to $2.53 billion in January 2022.

The Governor SBP Dr. Reza Baqir is confident that the country’s financing requirements will be successfully met with the available foreign exchange reserves and financial flows.

The story was originally published in Business Recorder on April 01, 2022.