With the Pakistani economy experiencing further issues, the State Bank of Pakistan (SBP) has seen their reserves decrease by an eyewatering $2.915 billion, something that has put European investors on edge.
Following the decline of the SBP reserves, the total reached USD 12.05 billion, revealed the data released by the central bank last week.
“This decline reflects repayment of external debt, including repayment of a major syndicated loan facility from China,” said the SBP adding, “The rollover of this syndicated facility is being processed, and is expected shortly,” reported Business Recorder.
Pakistan’s Foreign exchange reserves have been under severe strain since December last year. Amid the deepening economic crisis and the lack of foreign currency reserves, the country continues to remain under the burden of loans, remittances, higher exports and foreign direct investment.
Policymakers in Pakistan are concerned with the deteriorating condition of the economy while the country looks to revive its foreign currency reserves. The Pakistani Rupee has received a hard hit and touched a record low against the US dollar on Thursday.
As far as the total liquid foreign exchange reserves are concerned, it stood at USD 18.55 billion. Net foreign reserves held by commercial banks stood at USD 6.5 billion, as per Business Recorder.
Meanwhile, the Asian Development Bank (ADB) on Wednesday forecast Pakistan’s economic growth rate to slow down to 4 per cent this year from 5.6 pc in the Fiscal Year 2021.
The decline in the growth rate is owing to tighter fiscal and monetary policies and the Russia-Ukraine war. According to the Asian Development Outlook (ADO) 2022, ADB’s annual flagship publication, the Manila-based lending agency said Pakistan’s revenue collection was still lower when compared with peers and needed a strong reform effort to achieve its tax-to-GDP potential of 22-25pc, reported Dawn.
Moreover, the ADB also projected growth in South Asia to slow to 7pc in 2022 (from 8.3pc in 2021), before picking up to 7.4pc in 2023.
“Pakistan’s growth is forecast moderating to 4pc in 2022 on weaker domestic demand from monetary tightening and fiscal consolidation before picking up to 4.5 in 2023”, the ADB said.
The ADB expected inflation to pick up in FY22, averaging 11pc, reflecting higher international energy prices, significant currency depreciation, and elevated global food prices from supply disruptions reported the newspaper.
Pakistan is a net importer of oil and natural gas, with both comprising almost 20pc of total imports, the country will continue experiencing strong inflationary pressure for the rest of the current fiscal year from the jump in global fuel prices related to the Russian invasion of Ukraine.
The Rawalpindi Chamber of Commerce and Industry (RCCI) has expressed deep concern over the current economic and political uncertainty in the country.
The trade deficit has reached historic levels, the rupee continues to depreciate against the dollar, and foreign exchange reserves are declining sharply. It’s a Save Our Souls (SOS) call to the relevant quarter to address the current situation.
In a joint statement President Nadeem Rauf and group leader and former President RCCI Sohail Altaf said that trade relations would have to be kept separate from politics. Pakistan’s trade relations with the United States and Europe should be viewed beyond politics. The United States and Europe are important economic partners of Pakistan and both are major export markets for Pakistan.
Pakistan exports $6.5 billion worth of goods to the United States, while its exports to Europe are close to $16 billion. Rauf said that if immediate steps are not taken then the country will face a severe economic crisis. The dollar has reached Rs186 and it is falling further. Political parties have to show prudence and wisdom, he added.
However, with Pakistan flirting with the FATF's blacklist, avoiding it only thanks to the help of China, Turkey and Malaysia, European investors are withdrawing from the country, finding it a difficult place to do business in.
The FATF is an inter-governmental body established in 1989 to combat money laundering, terrorist financing and other related threats to the integrity of the international financial system.