Pakistan Crisis: Neighbor in crisis, decline in foreign exchange reserves amid political uncertainty and economic crisis

Amid political instability and economic crisis in neighbouring Pakistan, foreign exchange reserves continue to decline due to debt repayments. The State Bank of Pakistan (SBP) report said that the trend of decline in foreign exchange reserves continues and on January 26 it was recorded at $ 8.21 billion, which is $ 54 million less than the previous week's $ 8.27 billion.

The nation's commercial banks hold net reserves of US$5.04 billion, making up the nation's total liquid foreign exchange reserves of US$13.26 billion. The recent $705.6 million tranche from the International Monetary Fund (IMF) under its three billion dollar loan programme, according to the Central Bank of Pakistan, has had a positive effect. The CEO of Arif Habib Limited, Shahid Ali Habib, stated on social media that the Pakistani rupee's stability versus the US dollar has been significantly aided by the high reserve level.

The IMF's revision of USD 9.1 billion for Pakistan's foreign exchange reserves by June 2024 indicates a sustained, incremental increase. According to the news of Express Tribune, foreign exchange reserves had declined to $ 8.27 billion last week. The rupee has fallen to a record low of 276 Pakistani rupees against the US dollar due to low reserves and fears of further delay in the IMF deal due to the ongoing political turmoil.