Hi everyone! I hope you are all doing well. Welcome back to another blog. This article will discuss the topic in detail “SBP Reserves Decline”. Regular payments made towards external debts have contributed to this decline. The situation arose due to the current pause in the International Monetary Fund (IMF) program. The program is expected to conclude by the end of this month.
The State Bank of Pakistan (SBP) announced a decline of $179 million in the country’s reserves. The total now stands at $3.91 billion as of June 2. This decrease is concerning as it leaves a limited amount available for controlled imports, covering approximately one month.
As of June 2, the net foreign reserves held by commercial banks in the country have reached $5.42 billion, reflecting a notable increase of $1.51 billion compared to the reserves held by the central bank. This substantial difference highlights the significant role played by commercial banks in accumulating foreign reserves. Furthermore, the total foreign reserves held by the country have now reached a substantial sum of $9.3 billion. This accumulation of foreign reserves signifies the country’s efforts to strengthen its economic stability and safeguard against potential financial challenges.
Pakistan’s foreign exchange reserves have declined for the sixth consecutive week. The absence of signs for acquiring external financing worsens the situation. Political instability is the root cause, impacting the nation’s economy negatively.
The economy, with a total valuation of $350 billion, is currently experiencing significant turmoil and instability. This predicament arises from a combination of financial woes and a prolonged delay in finalizing an agreement with the International Monetary Fund (IMF). The agreement’s significance rests in its capacity to unlock crucial funding that is urgently needed to prevent the imminent risk of default.
The government has been negotiating with a lending institution in Washington to resume the disbursement of a $1.1 billion loan tranche. The suspension of this tranche, part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019, has been in effect since November.
Earlier today, during a press conference, Finance Minister Ishaq Dar confidently announced that the coalition government has officially shared the comprehensive budget numbers with the International Monetary Fund (IMF). The primary objective behind this action is to unlock the crucial ninth review process.
The government is under pressure from the IMF to tighten fiscal policies and implement austerity measures. Meeting the IMF’s conditions is crucial for accessing the final bailout installment. Also, it plays a pivotal role in ensuring economic stability and financial well-being. The urgency to comply is driving the pressure.
The International Monetary Fund (IMF) imposed certain conditions on Pakistan, requiring the abolition of subsidies on energy and other sectors, permitting the rupee to freely fluctuate against the US dollar, implementing higher taxes and duties, and imposing restrictions on imports.
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