RIZWAN BHATTI
KARACHI: The State Bank of Pakistan’s foreign exchange reserves fell drastically by over six billion dollars during the last fiscal year (FY18), mainly due to external debt servicing and higher current account deficit.
Bankers said the start of the last fiscal year was not pleasant as the SBP reserves declined sharply by over one billion dollars just in first three weeks of July 2017.
Foreign exchange reserves have been decreased sharply because of scheduled debt obligations, rising current account deficit and other official payments. Several expected foreign inflows could not materialize during the last fiscal year, following which, the SBP financed the external account deficit and other payments from its own reserves,” they added.
According to State Bank of Pakistan’s statistics, the country’s total foreign exchange reserves (comprising SBP and banks) fell by 23 percent during the last fiscal year (FY18). The country’s total liquid forex reserves stood at $ 16.386 billion as on June 30, 2018 compared to $ 21.368 billion on June 30, 2017, depicting a decrease of $ 4.98 billion.
The detailed analysis revealed that the entire downfall has been witnessed in the reserves held by the SBP as it was responsible for official payments, while reserves held by the banks posted some increase during last fiscal year.
Overall, the SBP’s reserves declined by $ 6.354 billion reaching below $10 billion by the end of last fiscal year. The reserves held by the SBP stood at $ 9.788 billion at the end of FY18 down from $ 16.143 billion at the end of FY17.
During the period under review, with an increase of $1.345 billion, the reserves held by banks reached $ 6.596 billion in June 2018 up from to $ 5.224 billion in June 2017.
The country’s s current account deficit reached historical level of $15.6 billion in July-May of this fiscal year, while on the other hand Foreign Direct Investment (FDI) presented a dismal performance, falling by 1.3 percent to $ 2.476 billion in the first 11 months of FY18.
The federal government borrowed some $ 2.5 billion through the sale of Eurobond and Sukuk in the international market in November 2017 to build its depleting foreign exchange reserves. The State Bank also raised one billion dollars from a Chinese bank as commercial loan in May this year to ensure timely external debt payments.
