SBP’s foreign reserves continue to decline, stand at $7.8bn

KARACHI: The total liquid foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased by $106 million to $7.899 billion during the week ended September 30, 2022, due to external debt repayment, according to data released by the State Bank of Pakistan (SBP) on Thursday.

According to SBP the central bank’s foreign exchange holdings were recorded at $7.9 billion, down from $8.6 billion on September 30 by $106 million.

The SBP reported on Thursday that the country’s total liquid foreign reserves were at $13.59 billion. Commercial banks held $5.69 billion in net foreign reserves.

 “During the week ended on September 30, 2022, SBP’s reserves decreased by $106 million to $7,899.8 million due to external debt repayment which includes interest payments on Eurobonds,” said the SBP.

Moreover, Moody’s Investors Service (Moody’s) on Thursday downgraded the government of Pakistan’s local and foreign currency issuer and senior unsecured debt ratings to Caa1 from B3 after seven years.

Moody’s has also lowered the senior unsecured MTN program’s rating from (P) B3 to (P) Caa1. The prognosis is still gloomy.

In the wake of the disastrous floods that have struck the nation since June 2022, the decision to lower the ratings to Caa1 is motivated by increased government liquidity, external vulnerability risks, and higher debt sustainability risks.

The floods have significantly increased the requirement for social spending while also making Pakistan’s liquidity and external credit problems worse. Government revenue has also been negatively impacted.

According to the rating agency, Pakistan’s long-standing credit weakness of extremely weak debt affordability would continue for the foreseeable future.

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