- Decline by $189 million, or 2.12 percent, in a week
By Mushfiq Ahmad
KARACHI: Pakistan’s foreign exchange reserves fell to a new six-year low during the week ended September 13, according to official figures.
The State Bank of Pakistan said on Thursday that country’s total liquid foreign reserves fell to $8.912 billion on September 13 from $9.101 billion on September 6, recording a decline of $189 million or 2.12 percent. It was in 2002-03 that the foreign exchange reserves of the country were seen at this level the last time.
According to the break-up, foreign reserves held by SBP stood at $5.524 billion, showing a reduction of $198 million from $5.722 billion on September 6.
Net foreign reserves held by banks other than SBP reached $3.387 billion, rising $9 million from $3.378 billion on September 06.
Foreign exchange reserves of the country continue to deplete due to rising imports, stagnant exports and outflow of foreign investment from stock markets.
The State Bank has found it difficult in recent months to arrest the downward trend of foreign exchange reserves. Sharp depletion in the foreign exchange reserves during last eleven months has taken away the central bank’s ability to intervene in the market and support the domestic currency. The situation is so grim now that the central bank is now buying dollars from the market instead of selling them.
The demand for dollar has risen too much in the recent past due to the huge increases in trade and current account deficits. Pakistan’s current account deficit in July and August this year was higher by $1.001 billion or 63.71 percent at $2.572 billion as compared with $1.571 billion in the same months of last year. Trade deficit increased from $1.593 billion in July-August 2007 to $2.657 billion in July-August 2008.
The outflow of dollars from stock markets has added to this crisis. According to the National Clearing Company of Pakistan, the outflow of foreign investment from Pakistan’s equities from July 1 to September 18 stood at $131 million.
Bankers told Daily Times that people are converting their money lying with banks into dollars as the rupee continues to lose its value.
A look at the foreign exchange reserves sheet posted by the State Bank on its website reveals that the foreign exchange reserves with banks have been rising since February this year while the reserves with the central bank continue to fall from their October 2007 peak of $16.486 billion.
Banks’ reserves have increased from $2.107 billion at the end of February 2008 to $3.387 billion on September 13, an addition of $1.28 billion. During the same period—from February 2008 to September 13—the reserves with central bank have declined from $11.923 billion to $5.524 billion, a fall of $6.399 billion.
Source: Daily Times, 19/9/2008