The State Bank of Pakistan (SBP) is grappling with a distressing situation as its foreign exchange reserves witness a continuous decline for the third consecutive week. This alarming trend is primarily attributed to the country’s ongoing struggle to secure a much-needed deal with the International Monetary Fund (IMF).
The SBP’s recent statement reveals that the reserves have plummeted by $72 million, reaching a meager $4.31 billion as of May 12. This decline is primarily due to substantial external debt payments, leaving Pakistan with reserves that are sufficient for less than a month’s worth of imports.
IMF Deal Delay and Financial Challenges Exacerbate Pakistan’s Economic Woes
Pakistan’s economy is currently grappling with significant challenges that are further exacerbated by financial difficulties and the prolonged delay in reaching an agreement with the IMF. The absence of a deal with the IMF is particularly concerning as it hampers the country’s ability to access crucial funding that could help mitigate the risk of default. The situation worsened on May 11 when the SBP witnessed a decline of $74 million in foreign exchange reserves within a single week, resulting in reserves amounting to a mere $4.38 billion. To add to the concern, commercial banks hold net foreign reserves totaling $5.6 billion, surpassing the central bank’s reserves by $1.01 billion. Thus, the country’s total liquid foreign reserves stand at $9.93 billion, which still falls short of the desired levels.
The IMF remains skeptical and has been urging Islamabad to take immediate and concrete actions to unlock the loan program. Despite assurances from friendly nations regarding external funds for Pakistan, the IMF insists on a repayment plan for a $3.7 billion loan due in June, along with a demonstration of stronger support from these nations to fulfill the country’s commitments. The urgency to secure the IMF deal and stabilize foreign exchange reserves is now of paramount importance for Pakistan’s economic stability.