As per the official data released by the Central Bank, Pakistan’s foreign exchange reserves slumped more than 12% or $1.6 billion over just three weeks due to the havoc created in global financial markets amid coronavirus.
Foreign exchange reserves were amounted to $11.2 billion on 27 March, down from $12.8 billion as on March 6.
In the previous fascial year, Pakistan had entered into a programme with the International Monetary Fund (IMF) amid a wide current account deficit and diminishing reserves that have been supported with temporary deposits from China and Saudi Arab.
The situation was far better until March but it has started to decline with the first coronavirus case reported in the country. CEO of Topline Securities, Muhammad Sohail said, “This is an alarming situation because Pakistan came out of an external account crisis just last year through IMF funding.”
He said that the plunge in the foreign exchange reserves occurred due to multiple factors including panic selling of debt and equities. However, reserves are expected to fall further in the coming few weeks.
Pakistani currency has also been affected by the depletion i.e. it dropped 8% to 166.5 per dollar in March. The government has directed the fuel retailers and refiners to cancel imports from April and increase purchases from national refiners.
Sakib Sherani, CEO of Islamabad-based macroeconomic consultancy firm said, “Demand is collapsing for petroleum products because of the lockdowns and the situation we’re in, but this policy is largely driven by the fact that there is pressure on the reserves and the currency.”
“In March, we’ve only seen the beginning of the dip in exports. The bulk of the coronavirus hit will come in April, May, and June and we’ll see a very substantial decline,” he remarked.