ISLAMABAD  - The State Bank of Pakistan-held foreign exchange reserves have declined to a dangerously low level of $3.05billion, which is the lowest level of reserves in last twelve years.

Pakistan’s foreign exchange reserves, which are sufficient to cover only three weeks of imports, are sharply depleting despite the fact that the country had signed an extended fund facility (EFF) programme worth $6.68 billion with International Monetary Fund (IMF) in September this year. The IMF programme has apparently failed to boost the market confidence and reserves have tumbled to twelve-year low level. The country has also failed to bring inflows from other sources as well.

The country’s reserves reduced by $558 million in one week period mainly due to the repayment to IMF in last week of November 2013. According to the latest figures of the central bank, Pakistan’s total liquid foreign exchange reserves stood at $8.24 billion on December 5, 2013 of which the State Bank of Pakistan and commercial banks accounted for $3.05 billion and $5.19 billion, respectively.

“The government should approach brotherly and friendly countries to immediately seek $4 to $5 billion for stability in reserves and rupee value in December”, said renowned economist Dr Ashfaque Hassan Khan, who is serving as Dean NUST Business School (NBS), while talking to The Nation on Thursday. He added that Pakistan would have to request the IMF to change design of the IMF programme, discourage imports of non-essential items by imposing regulatory. He further said that government should take action to improve the balance of payments situation, which is worsening with the passage of time.

Dr Khan said that even the expected IMF tranche worth of $550 million in December could not help in building the reserves and to stabilize the declining value of rupee, as country would also repay around $200 million to the Fund during ongoing month (December). The net foreign reserves would be at $around $3.2 billion in December if additional inflows except IMF tranche did not materialize, he added. 

Sources informed that economic wizards of the government failed to adopt any strategy to build the reserves of the country, as they were aware of the fact that reserves would tumble to three billion dollars in December. This was the prime responsibility of the economic team to adopt Plan B to avert the balance of payment crisis.

The Nation tried to contact Secretary Finance Dr Waqar Masood Khan and spokesperson Rana Asad Amin, but they were not available to comment till filing of the story.

It is worth mentioning here that Pakistan’s foreign exchange reserves had been on the decline since July 2011 when reserves stood at $14.8 billion. Pakistan had lost $12.0 billion reserves in just 29 months by end-November 2013. The main reasons behind declining foreign exchange reserves of the country are declining foreign inflows and rising debt repayments in last two and half years. Pakistan had lost $2.2 billion reserves in just four months (since July 2013) and $1.7 billion since signing the IMF programme. Now Pakistan will have to repay $300 million in ongoing month and another $1.2 during Jan-June period.

Pakistan had already received the first tranche worth of $550 million in early September 2013. On the other hand, Pakistan is expecting to receive $550 million from IMF in December. The IMF mission, who visited Pakistan from October 28 to November 8, would present a report for the IMF Executive Board on the first review under Pakistan’s EFF that is tentatively scheduled for consideration in late December. Upon approval, SDR 360 million (about $550 million) would be made available to Pakistan.