ISLAMABAD - The State Bank of Pakistan-held foreign exchange reserves declined to drastically low level of below four billion dollars to stand at $3.845 billion, enough to cover less than a month worth of imports.

The reserves might come down to around three billion dollars in next couple of weeks and it would increase pressure on Pakistani rupee that is already under pressure. Pakistan would repay over $800 million to various international financial institutions in November, which would reduce the reserves. This situation with lower prospect of external financial inflows is likely to create panic in the forex market, brightening the chances that the exchange rate will face a sharper depreciation.

With foreign reserves diminishing fast, Pakistan had already entered into IMF's programme worth of $6.64 billion in early September 2013. the government is struggling to build its reserves despite receiving one tranche of $550 million. The current level of foreign exchange reserves is just enough to cover less than a month worth of imports while the IMF considers adequate foreign reserves for any country enough to cover three months of imports. However, the central bank's official reserves will further go down to three billion dollars by end of November, which is sufficient to cover the three to two and half weeks of the imports.

According to the data issued by the SBP on Monday, the forex reserves held by the State Bank tumbled to $3.845billion in the week ending on November 8 from $4.225 billion in the previous week, while the country's total liquid foreign reserves fell to $9.078 billion from $9.510 billion, representing a sharp fall of $433 million over the previous week.

The country's foreign exchange reserves would remain under pressure in the weeks to come, as Pakistan would repay around $800 million to the International Monetary Fund (IMF) and other lending institutions. Pakistan had paid $147.6 million to the IMF against the stand-by arrangement facility on November 11. However, two other principal loan repayments to the Fund are to be made this month. Pakistan has to pay about $150 million on November 18 and $400 million on November 26, bringing the total to around $700 million for this month. Meanwhile, Pakistan would pay over $300 million to the World Bank and other lending agencies during the month. This would put additional pressure on the country's foreign exchange reserves.

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.

The IMF mission in its recent visit to Pakistan had expressed concerns over the depleting foreign exchange reserves of the country despite it entered in the Fund programme under extended fund facility (EFF). According to the IMF's statement issued, "The government meeting all of the quantitative performance criteria by end September 2013, with the exception of the target on Net International Reserves (NIR), which underperformed due to lower than expected external flows including foreign investment and other official assistance, coupled with interventions by the State Bank of Pakistan (SBP) to ease pressure on the Rupee. Going forward, challenges on the balance of payments will persist for some time to come, so it is crucial that firm action be taken to begin to rebuild foreign exchange reserves".