The foreign exchange reserves held by the central bank rose by 9.4% on a week-on-week basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
On February 10, 2023, the SBP’s foreign currency reserves were recorded at $3,192.9 million, up by $276 million compared to $2,916.7 million on February 3.
The central bank gave no reason for the rise in foreign exchange reserves.
However, market talk suggests that the foreign exchange reserves increased after the central bank bought US dollars from the inter-bank market.
In recent days, the flow of foreign currency has increased in Pakistan’s market compared to consumer demand. “Surplus supplies have encouraged the central bank to intervene (by buying dollars to strengthen the forex reserves),” a market commentator said.
Exporters are selling the US greenback in the market on reports the rupee will stabilise around Rs265-275 to a dollar. Similarly, the inflow of workers’ remittances through official channels has increased after 16.5% devaluation of the rupee in the previous two weeks.
Overall, the liquid foreign currency reserves held by the country, including the net reserves held by banks other than the SBP, stood at $8,702.2 million. The net reserves held by commercial banks amounted to $5,509.3 million.
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According to analysts, the biggest reason for the continuous decline in the country’s foreign currency reserves over the past several weeks was the pressure of external payments.
A resumption of the IMF loan programme, however, will pave the way for the release of next $1.1 billion tranche in a few weeks or about a month and unlock a couple of billions of dollars more from other multilateral and bilateral creditors including friendly countries.
It will provide much-needed support for stabilising the foreign exchange reserves, help avert the looming risk of default and enhance the country’s capacity to pay for imports and repay foreign debt.