KARACHI: The State Bank of Pakistan’s foreign exchange reserves declined sharply by over one billion dollars during the last four weeks mainly due to external debt servicing.

The SBP’s reserves are on decline since September due to scheduled foreign debt payments. Although, during the last few weeks, the SBP has also received some inflows from multilateral and bilateral agencies, however, these inflows were less than the outflows, because of which the SBP’s foreign exchange reserves posted a notable decline.

According to foreign exchange statistics, the SBP’s foreign exchange reserves slipped below $12 billion due to continued external debt payment. SBP’s reserves stood at $11.798 billion on October 9, 2020 compared to $12.820 billion on September 11, 2020, depicting a decline of $1.02 billion in a month.

During the week ended September 18, SBP’s reserves decreased by $ 119 million to $ 12.70 billion due to government external debt repayments. Reserves held by SBP further fell $ 342 million to $ 12.36 billion week ended September 25, 2020. This decline was attributed to government external debt payments that amounted to $311 million and other official payments. In addition, SBP made external debt payment of $ 580 million and after accounting for official inflows including $300 million received from Asian Development Bank (ADB), SBP’s reserves decreased by $ 205 million to $ 12.155 billion in the week ended October 2, 2020.

During the previous week ended October 9, SBP made external debt repayment of $ 507 million and after accounting for inflows, SBP reserves decreased by $ 356 million to $ 11.798 billion. Collectively, SBP’s reserves fall sharply over one billion in just last four weeks to reach below $11 billion.

However, reserves held by commercial banks slightly increased by $78.5 million during the last one month, Commercial bank’s reserves surged to $7.217 billion as on October 9, up from $7.138 billion as on September 11, 2020. The country’s total liquid foreign exchange reserves fell $994 million to $19.016 billion.

Economists said that higher home remittances inflows and lower import bill is supporting external account. Cumulatively, current account balance has shown a surplus of $805 million in July-August of FY21. While, the country is receiving, over $2 billion inflows of home remittances since June 2020 and this will also help to build the depleting foreign exchange reserves.