SBP reserves post second straight fall

KARACHI: The foreign exchange reserves of the State Bank of Pakistan (SBP) experienced a further decline of $54 million during a week, exacerbating the vulnerability of the exchange rate. This marks the second consecutive drop in the central bank’s reserves, with a $63m decrease reported last week, highlighting imbalances in the outflows and inflows of dollars. The SBP regularly purchases dollars from the interbank currency market to maintain reserves at a certain level. The International Monetary Fund (IMF) aims to see the SBP’s reserves reach $9 billion by the end of fiscal year FY24. However, the inflows are insufficient to maintain reserves even at $8bn. Some financial sector experts have suggested that the next tranche of $1.2bn from the IMF could assist the SBP in improving its reserves, but it would be a temporary increase, since the debt repayment of about $6bn is still unresolved. The government has been attempting to borrow, but the international market is unresponsive to Pakistani bonds at this time due to both political and economic instability.