ISLAMABAD – Pakistan’s foreign exchange reserves have been unabatedlydepleting so far in the month of July, which saw an outflow of $778 millionin the past 21 days.

According to the State Bank of Pakistan (SBP), the foreign exchangereserves decreased to $9.01 billion from $9.788 billion during the periodof June 29 to July 20.

The reduction of foreign exchange reserves was mainly due to the repaymentof the heavy loans and their interest to various foreign banks andinternational agencies.——————————

On the other hand, the foreign exchange reserves maintained by the privatebanks increased by $121 million, reaching $6.71 billion during the sameperiod.

Overall, the foreign exchange reserves held by the central bank and privatebanks decreased to $15.72 billion from $16.38 billion during the periodunder review.

Managing foreign reserves’ liquidity in such circumstances proved to bequite challenging for the central bank. SBP’s liquid foreign reserveswitnessed a net reduction of S$ 7.1 billion to reach US$ 9.5 billion as ofJuly 20, 2018.

Depleting foreign exchange reserves is one of the two major seriousconcerns of the economy especially when the current account deficit is at arecord high while prices of petroleum products are getting higher in theinternational market.

The newly formed government has to tackle the issue of depleting foreignexchange reserves through short-term and long-term measures.

SBP commented in its recent report:

The country’s growth prospects are encouraging, with benign inflation andfavorable outlooks for exports and remittances, and some relief expectedfrom reduced non-energy import payments down the road. However, until thereis a significant improvement in the current account balance, the paymentpressure will continue to fall on the country’s reserves. This, in turn,creates the constant need to arrange external financing so that the foreignexchange reserves position offers some level of comfort.