As the Pakistani rupee value depreciates in the interbank market (1 USD =173.25 Pakistani Rupee), the foreign exchange reserves of the State Bank of Pakistan (SBP) declined drastically. The declining rupee value can erode investor confidence in the Pakistani economy at large.
During the week ending October 15th, the SBP reserves plunged by $1.646 billion to $17.492bn from $ 20 billion in August. According to the SBP, the reserves declined largely due to burgeoning external debt repayments. As the external debt is paid off in US dollars, the declining value of the rupee makes debt repayment more difficult for the public exchequer. The external debt also includes $1 billion against Pakistan International Sukuk. On the other hand, the government of Pakistan is also dealing with the International Monetary Fund for loans to raise USD 3.5 billion by selling bonds on the international market.
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