Pakistan's foreign exchange reserves plunge to lowest level since December 2019

Pakistan Prime Minister Sharif says country is 'drowning'in debt

The decline was attributed to outflows related to external debt repayments. Analysts estimate the central bank’s latest reserves can cover imports for 1.54 months.

The reserves of commercial banks, however, soared up to $6.067 billion from $6.054 billion. Increasing twin deficits — the current and trade deficits, lack of foreign currency inflows, and increasing foreign debt servicing obligations led to the fast depletion of the forex reserves.

The falling reserves put pressure on the currency as it plunged to an all-time low of Rs 191.77 per dollar in the interbank market. The delay in the revival of the International Monetary Fund (IMF) bailout along with the lack of pledges of funding from friendly countries is adding pressure to the foreign reserves and the local unit.

Also read: Pakistan PM requests China's support in reviving Karachi Circular Railway

Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said the decline in the reserves was nominal. However, in terms of imports cover, we are lower than three months, and we have to go into the IMF programme to stabilise the reserves, Tariq was quoted as saying.

Prime Minister Shehbaz Sharif, who took office last month after the ouster of Pakistan Tehreek-i-Insaf’s Imran Khan, faces a battle to secure the revival of the IMF bailout as a bailout is a prerequisite for further financial assistance from other bilateral and multilateral creditors. Pakistan needs quick foreign currency inflows to meet import and debt payments amid falling foreign exchange reserves.

The present government will also have to cut costly energy subsidies introduced by the then .

Also read: Dealing with Taliban will be biggest challenge of Pakistan’s new government, says expert