March 30, 2023
Finance Pakistan

The Deepening Forex Problem

Pakistan remained in the grip of the foreign exchange crisis in 2022. Now, at the beginning of 2023, the situation has deepened further.

On January 6, forex reserves held by the State Bank of Pakistan (SBP) plunged to $4.343 billion, enough to cover just three weeks of imports, after the country repaid $1bn commercial loans of two UAE-based banks. Despite such a massive decline in the forex reserves, the rupee remained “stable” in the interbank market. It closed at 228.15 to a US dollar on January 13, unchanged from January 12’s closing of 228.14 per dollar — thanks to the SBP’s policy of keeping the local unit in the “oxygen tent”.

Billions of dollars’ may, however, start coming in now from the international financial institutions and friendly countries Saudi Arabia, China and the UAE after the much-awaited release of the last withheld tranche of an ongoing $6bn International Monetary Fund (IMF) loan. The government may also seek another loan from the IMF and request the Fund to disburse the first tranche of it along with the withheld one.

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