The central bank said on Thursday that the State Bank of Pakistan’s (SBP) foreign exchange reserves fell 4.2% to $7.498 billion for the week ending November 25 and attributed the decline to external debt repayments.
The decrease, which was $327 million in absolute terms, occurred before the SBP was scheduled to pay $1 billion in Sukuk (Sharia-compliant bonds) on December 2. (today).
The nation has a lengthy list of obligations totalling $32$34 billion for the fiscal year. SBP Governor Jameel Ahmed recently stated that reserves were constant despite payments of $1.8 billion in November.
Since his first day on the job, he has been optimistic that Pakistan would be able to fulfil the obligations of the debt payment. He thinks contributions from foreign lenders will cover the need, but the State Bank’s declining reserves have harmed the exchange rate.
In addition, Pakistan’s lack of reserves makes it hard for the nation to return to the international market to issue bonds, even at higher rates, despite the fact that Pakistani bonds are traded there for less than half their true value.
This week, the Asian Infrastructure Investment Bank gave Pakistan $500 million. The World Bank has already started to offer to fund for the rehabilitation of flood victims; however, these inflows, which might total up to $2 billion, have not yet materialised.
Since the government failed to meet the first-quarter objective, the discussions with the IMF over the growing fiscal shortfall have been postponed. The Federal Board of Revenue said that tax collections exceeded the Rs2.68 trillion five-month objective and the Rs537 billion monthly target.
Compared to Rs2.33tr collected a year earlier, Rs2.688tr was collected, representing a 15.3 percent rise. Compared to the goal set for this month, November’s collections increased 11.5 percent to Rs. 538.2 billion. Despite these encouraging improvements, the government may have serious concerns about declining remittance inflows. The last three months have seen a fall in remittances, which were $31.2 billion in the previous fiscal year.
Bankers claim that the low official exchange rate is the primary cause of the decline, even though the price on the black market is substantially higher than the official banking rates.