Pakistan witnessed further decline in foreign reserves as the State Bank of Pakistan said the amount currently stood at $5.82 billion as of Dec 23, which the lowest level in eight years.
The alarming reduction – $294 billion in the week ending Dec 23 – means the country is going to face the challenge of meeting the foreign debt service although Finance Minister Ishaq Dar still believes that Pakistan will not default.
Earlier, it was reported that Pakistan would have to repay approximately $8.3 billion in external debt over the Jan-March period. Out of this amount, Islamabad will have to get rollover of $2 billion from the UAE by March-end
Meanwhile, there is another outstanding commercial loan repayment of $700 million to Chinese banks which Pakistan is expecting to be refinanced. The principal amount of debt servicing stands at $5.035 billion while the interest repayment is hovering around $426.88 million, so the total outstanding amount has gone up to $5.462 billion.
The developments are really not good as the IMF tranche still nowhere to be seen, as the lenders has set different conditions mainly to improve revenue collection which will naturally hike inflation and further hurt the masses – a move that frighten any government.
But the central bank’s foreign exchange reserves have been continuously falling in the current fiscal year.
In April, when the Imran-led PTI government was replaced, the reserves stood at $10.5 billion as compared to $5.8 billion on Dec 23.
Furthermore, the instable exchange rate is also damaging the economy. A US dollar, which was sold at Rs180 in April, traded at Rs226 in the inter-bank market on Thursday. But the black market is offering a dollar for Rs260 to Rs270.
This significant difference in the rates has already started affecting the remittances coming through official banking channels with inflows witnessing a falling trend, thus encouraging the people to use Hawala and Hundi.
At the same time, Pakistan saw a massive decline in foreign direct investment (FDI) during the first five months of the fiscal year 2022-23.
Official data shows that the FDI had dropped by more than half to $430.1 million in the first five months of FY23 against an amount of $884.9 million recorded for the corresponding period last year.
Similarly, the FDI stood at $81.8 million in November after a 48 percent dip when compared with $158.4 million in the same month in 2022.