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High trade, current account deficits pull forex reserves, rupee down

SBP puts total foreign exchange reserves at $25.96 billion

SAMAA | - Posted: Oct 15, 2021 | Last Updated: 2 months ago
SAMAA |
Posted: Oct 15, 2021 | Last Updated: 2 months ago

Domestic foreign exchange reserves decreased by $30.05 million to $19.13 billion while funds held by commercial banks increased to $6.83 billion, bringing the cumulative forex reserves at $25.96 billion, data released by the State Bank of Pakistan or SBP for the week ending on October 8 showed on Friday.

Foreign exchange reserves have been under constant pressure on account of rising trade and current account deficits. This is also negatively affecting the value of Pakistani rupee against US dollar.

According to experts on economy, imports are steadily increasing which is widening the trade deficit and affecting the balance of payments. They insisted that this is also causing a decrease in foreing exchange reserves and mounting pressure on the rupee value in the currency market.

Figures released by the Federal Bureau of Statistics for the July-September period showed that imports surged by 65.08%, climbing to $18.63 billion against $11.28 billion during the same period last year.

Meanwhile, exports climbed by 27.32% to $6.96 billion, taking the total trade deficit to $11.66 billionwhich is 100% more than the figures for the same period last year.

Foreign remittances, whch previously covered a large portion of the trade deficit, are now becoming insufficient to bridge the widening gap.

In August this year, the country’s foreign exchange reserves had climbed to $27.06 billion but the use of forex reserves for covering the trade deficit pushed the total reserves down by $1.1 billion.

The depletion of forex reserves is also pushing the value of Pakistani rupee down against the US dollar.

On October 14, rupee traded at Rs171.2 against US dollar in the inter-bank trade.

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