Pakistan’s foreign exchange reserves continued to decline the reserves went down by $2.49 billion since the start of 2017.
According to statistics provided by State Bank of Pakistan (SBP), the level of foreign reserves is currently at $20.67 billion by the end of May-12, 2017 from $ 23.16 billion as seen at the start of 2017.
The foreign exchange reserves which were primarily built up through inflows and loans, reached an all-time high level of $24 billion in October 2016. Since then the reserves have fallen off by a total of $3.33 billion.
The foreign exchange held by SBP witnessed an erosion of $2.37 billion by May 05 of 2017. Its reserves decreased to $15.89 billion from $18.26 billion that it held during the 5 month period.
It should be mentioned that reserves and deposits have been maintained by the private banks’ growth, which has somewhat contained the situation. Reserves of commercial banks witnessed a surge by $0.70 billion in the first quarter of 2017. It stood at $4.87 billion by end of May 12. Last year this figure stood at $4.08 billion.
The decline of foreign exchange reserves was the result of SBP paying back some loans and also due to debt servicing (interest on loans).
In March 2017, Pakistan has received a total $ 550 million in two installments from USA which gave it some respite. The amount has been transferred under the Coalition Support Fund (CSF) from the US due to pending military expenses for the Pakistani government.
Moreover, the country received an inflow of $317 million from multilateral resources. If these inflows were not counted, the foreign exchange of the country could have been further down by $867 million.
Pakistan provisionally received $4.565 billion, .i.e. 57 percent of budgeted estimates of foreign assistance from multilateral and bilateral donors (July-January) in the current financial year against $4.28 billion during the same period of last year.
In 2017, the government is likely to continue its borrowing from external sources and will continue to make repayment of its loans along with heavy interest.
Current Account Deficit Up 204% During first 10 months of FY 17
Pakistan’s current account deficit crossed the mark of $7 billion for the first time during the ten months of current financial year 2016-17. which is 204 percent higher than the previous year.
According to SBP, the current account deficit stood at $7.24 billion during the period of July to April as compared to $2.37 billion in the corresponding period of last financial year.
The grim situation regarding balance of payments was due to the decreasing inflows of foreign receipts based on exports earning and remittances inflows, along with ballooning import bills of various machinery and petroleum products.