KARACHI: Foreign exchange reserves held by the State Bank fell by $170 million to $2.916 billion during the week ending on Feb 3, but the rupee gained despite this piece of bad news on Thursday.

According to the State Bank, the decline in reserves was due to external debt repayments.

Experts believe that the country’s reserves are enough for only 16 or 17 days of imports. The biggest threat is the disconnect in supply of petroleum products, a grim reminder of which is visible in Punjab. The government claims to have petroleum reserves for 20 days.

Despite this bleak picture of foreign exchange reserves, the local currency gained significantly against the US dollar.

The rupee appreciated by Rs2.82 on Thursday, while it had gained Rs2.95 the previous day. During the last two working days the rupee has appreciated by Rs5.77 against the dollar.

Currency dealers said the rupee’s gain had no concrete ground. The gain reflected hopes that negotiations with the IMF would bring good news.

Another reason was the slowdown in smuggling of dollars to Afghanistan. According to a Bloomberg story, the Afghan government has announced punishment for those who take more than $500 out of the country. Afghanistan largely on smuggled dollars from Pakistan as it has no exportable products and suffers from sanctions imposed by the United States.

The SBP said the country’s total reserves amounted to $8.539bn, including $5.622bn that were with commercial banks, at the end of the week ending on Feb 3.

The currency market was confident that the dollar has achieved the optimum against the rupee and would now remain below Rs270 and Rs279.

Published in Dawn, February 10th, 2023