State Bank of Pakistan's foreign exchange reserves plunge to 8-year low at USD 5.8 bn

Karachi [Pakistan], December 30 (ANI): The State Bank of Pakistan's forex reserves on Thursday plunged by USD 294 million to USD 5.8 billion -- their lowest in eight years, reported Dawn.
The plunge in forex reserve is a worrisome scenario as it will create problems in the repayment of its huge foreign debts.
The central bank's foreign exchange reserves have been persistently falling since the beginning of FY23.
Analysts and experts paint a gloomy picture of the state of the economy as they believe that the country is close to default, reported Dawn.
Though Finance Minister Ishaq Dar insists Pakistan will not default, the situation on the ground hardly supports his assertions, but, experts are not simply ready to buy the finance minister's statement on default.
Since the change of government in Islamabad earlier this year, the SBP's foreign exchange reserves have been falling and the few inflows over this period have proved to be too little to meet heavy payments.
In April, when the Shehbaz-led PDM government replaced the Imran Khan-led PTI government, the reserves stood at USD 10.5 bn as compared to USD 5.8 bn on Dec 23, reported Dawn.
The fear of default is also evident from the exchange rate instability which has eroded the value of the local currency against all the major currencies, particularly the USD.
A US dollar, which was sold at Rs 180 in April, traded at Rs 226 in the inter-bank market on Thursday. Yet, the greenback has almost vanished from the open market over the last couple of months.
Worse, a grey market has emerged due to the shortage of the American dollar which is offering a dollar for Rs 260 to Rs 270, against the inter-bank rate of Rs 226, reported Dawn.
This significant difference in the rates has already started affecting the remittances coming through official banking channels with inflows witnessing a falling trend.
Approximately, Pakistan is losing about USD 300 million in remittances per month. Bankers said the low exchange rate is managed by the State Bank artificially had diverted this USD 300 million to the illegal grey market.
Currency experts said if this trend continues then more remittances would go to the grey market and the country would lose about USD 4 billion at the end of the current fiscal FY23, reported Dawn.
The poor economic growth has already slashed the foreign direct investment in the country as it received just USD 430 million during July-Nov FY23, compared to USD 885 million in the same period last year -- a decline of 51 per cent.
All stakeholders, except the foreign minister, were found to be extremely worried about the weakening health of foreign exchange reserves. They said the finance minister must announce that he had arranged payments to be made for the debt servicing.
Neither China nor Saudi Arabia has so far announced that they are going to help save Pakistan from default. (ANI)