SBP reserves fall below $7bn in FY24

The State Bank of Pakistan’s (SBP) foreign exchange reserves fell below $7 billion for the first time in the current fiscal year, posing challenges for the government to stabilise the exchange rate and meet debt servicing obligations. The SBP on Thursday reported a $136 million decline in reserves to $6.904bn due to debt repayments. This outflow of dollars brought the total SBP reserves to a five-and-a-half-month low during the current fiscal year, decreasing from the peak of $8.759bn in July FY24. Since then, reserves continuously declined, with the SBP losing $1.855bn from July to Dec 15. SBP reserves are decreasing as the government falls short of the borrowing target set for the current fiscal year. The latest data from the Pakistan Bureau of Statistics showed a 51 per cent shortfall in external borrowing, with $4.3bn raised compared to the $24.2bn target, and a $10bn five-month target. Experts and analysts said that there is little chance of improvement in the domestic situation, primarily due to the upcoming general elections on Feb 8, 2024. This uncertainty hampers the government’s ability to engage the international market and launch bonds to raise dollars. They also believe that after general elections, the formation of government would take up to three months, which means the rest of the current financial year will remain under the tight grip of uncertainties.