KARACHI: On Friday, the State Bank saw its dollar reserves reach $17.23 billion – a record last achieved in March 2017.
The total foreign reserves held by Pakistan at the beginning of July were $24.41 billion which increased by $1.11 billion within a week.
The State Bank announced its foreign exchange reserves within a lag of a week. When foreign exchange reserves held by the central bank and commercial banks are clubbed together, they are called the total foreign exchange reserves of the country.
Pakistan’s commercial banks hold $7.18 billion.
The central bank recently received a $1 billion loan from China, and another $440 million from the World Bank.
When the PTI government came to power, one of its biggest challenges was the country’s depleting dollar reserves. Within the first six months, the government claims it saw dollar reserves down to a level that was barely enough to pay for two months of imports.
To keep its position in the comfort zone, Pakistan was recommended to keep sufficient reserves to cover at least three months of import payments. The country, however, fell short when its reserves slipped below $6 billion in 2019 and was on the verge of a sovereign default.
To tackle this challenge, Prime Minister Imran Khan signed a $6 billion bailout agreement with the International Monetary Fund, which became a topic of national debate. After this, the country secured funding from multilateral donors such as the World Bank and Asian Development Bank. It helped Pakistan build its reserves.
Higher foreign exchange reserves play a key role in stabilising the dollar rate. A persistent increase in reserves tends to bring the dollar rate down, which means the rupee becomes stronger.
The dollar rate, on the basis of which Pakistan trades with the rest of the world, also affects the prices of consumer goods or inflation in the country.
