The State Bank of Pakistan (SBP) has seen a significant decrease in its foreign exchange reserves

 The State Bank of Pakistan (SBP) has seen a significant decrease in its foreign exchange reserves, which now stand at $3.7 billion, the lowest level since February 2014. Total liquid foreign reserves in the country are at $9.5 billion, with commercial banks holding $5.8 billion in net foreign reserves.

Last week, there was a slight increase in SBP-held foreign exchange reserves, rising by $258 million to $4.6 billion, the first rise in eight weeks. The rapid depletion of central bank reserves, which were nearly $18 billion at the beginning of 2022, highlights the pressing need for Pakistan to complete the next review of its International Monetary Fund (IMF) program.

The IMF mission is scheduled to visit Islamabad at the end of the month to continue discussions on the ninth Extended Fund Facility review, which has been delayed due to prior conditions set by the IMF. Despite the current crisis in foreign exchange reserves, Pakistan is still meeting its international financial obligations to avoid default.

Policymakers are actively seeking inflows of dollars, and on Thursday, Pakistan's rupee saw a historic depreciation against the US dollar in the inter-bank market, settling with a 9.6% loss in a single session as the country fulfills part of the IMF conditions, including a 'free-float exchange rate.'

Pakistan has also secured financing for oil derivatives worth $1 billion from the Saudi Fund for Development and pledges of nearly $10 billion at the International Conference on Climate Resilient Pakistan in Geneva. However, experts believe that these inflows are still not enough to meet the country's growing import needs, which have been limited due to the shortage of dollars.