The State Bank of Pakistan reported on Thursday that the foreign exchange reserves held by the country have declined even further during the last week. The total liquid reserves decreased by $88 million to $19.94 billion on August 11.
State Bank of Pakistan holds $14.31 billion of the foreign currency reserves while the reserves held by commercial banks stand at $5.63 billion.
According to the media sources, the breakdown of foreign exchange is partly due to payments on external debt as well as “other official payments”.
This is the lowest level of reserves that has been marked since June 2016. The government borrowed $1.5 billion from commercial banks in June, which breached the target set by government for 2016-17. The target for borrowing from commercial banks was $2 billion, but it rose to $4.4 billion by the end of June. In October, the reserves hit the peak of $24.4 billion and since then they have been in decline.
On the other hand, the reserves held by banks have hit a six-year high. Commercial banks have been observing the principle of short-term borrowing of foreign exchange in recent months. This is part of their efforts to replenish dollar liquidity in the face of a stable exchange rate amongst a growing current account deficit and falling reserves.
According the subsequent reports, The State Bank of Pakistan has warned regarding these increasing levels highlighting the fact that the level of short-term dollar borrowing by the banks is reaching $875 million.