KARACHI: The foreign exchange reserves of the State Bank of Pakistan (SBP) decreased by an additional $170 million, reaching a low of $2.9 billion, which is the lowest level since 2014.
The country held negotiations with the International Monetary Fund (IMF) for 10 days in an effort to unlock a tranche of $1.1 billion, but no progress has been disclosed as of yet. However, Finance Minister Ishaq Dar expressed his hope that positive news will be announced in the coming days.
IMF funding is crucial for the country’s $350 billion economy, which is currently facing a balance-of-payments crisis with foreign exchange reserves falling to less than three weeks of import coverage.
Last week, Prime Minister Shahbaz Sharif described Pakistan’s economic situation as ‘unimaginable.
As of now, the total liquid foreign reserves are at $8.54 billion. However, the net reserves held by banks are at $5.62 billion.
Pakistan has agreed to the stringent conditions set by the IMF, but the Staff-Level Agreement has not yet been signed, which is the only remaining path towards increasing its foreign exchange reserves.
According to Capital TV, the IMF delegation instructed the government to eliminate energy subsidies and raise the sales tax from 17% to 18%.
On the contrary, the government has presented recommendations to address the economic crisis instead of imposing additional taxes.
Meanwhile, it is noteworthy that the current level of foreign currency reserves is only enough to cover 0.60 months of import bills.
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