Forex Reserves Squeeze to Less Than Half in 2022

The passing year of 2022 has been tough for the macroeconomic indicators of the country as far as foreign exchange reserves is concerned which stood at a stable position at $23.8 billion in the beginning of the year and then squeezed to reach $11.7 billion at the end of the year.

According to the State Bank of Pakistan (SBP), the foreign exchange reserves saw a huge decline of $12.1 billion in 2022, which is over 114% dip as compared to the last year.

Huge import bills mainly in tandem with skyrocketing energy prices cost the continuous depletion of foreign exchange of the country. Various measures were taken to arrest the outflow of the foreign exchange reserves but it continued to witness outflow mainly in the second half of 2022.

Economic managers have taken various steps to control the import bill and foreign exchange but the country’s feet continued to drag toward the danger zone of default. These actions included a ban on various non-essential items for a longer period which badly hit local industries as a result.

To make the situation worst, the hoarding and smuggling of the Dollar have been reported mainly in the last quarter of 2022.

The rains and floods also damaged the economy including exportable items and cash drops. During the period, the domestic and geopolitical situation also kept the foreign investors away from the country.

On the other hand, the receipts through exports and remittances also showed a consistent drop due to the global economic slowdown.

During the period, the country paid a huge payment of $1 billion on account of international bonds. It also received over $1 billion from International Monetary Fund (IMF) amid strict conditions.

The imbalance of inflows and outflows of the greenback also badly hit the parity of the Rupee against the Dollar. The value of the Rupee against the Dollar stood at 177.45 to 178.25 in interbank and open markets which surged to 226.5 to 227.5 by the end of 2022. The unavailability of the Dollars was also reported in the interbank market by banks and exchange companies.

The economic situation of the country stands vulnerable mainly on the external side at present however tough measures need to control the situation to get further exacerbated.

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