Islamabad: Pakistan's foreign exchange crisis has "deepened significantly" as the forex held by the State Bank of Pakistan (SBP) has recently reached a low of USD 4.343 billion, which is enough to cover only three weeks of imports, Financial Post reported. The drop in foreign exchange was due to the repayment of USD 1 billion in commercial loans to two UAE-based banks.

In addition, remittances in July-December 2022 period were recorded at USD 14.1 billion, which is USD 1.7 billion less than in the same period last year. On January 6, the forex reserves in the SBP touched the lowest mark of USD 4.343 billion.

The weekly food inflation has increased by nearly 31 per cent compared to last year, as per the news report. All these factors have increased the daily hardships of people in Pakistan who are struggling to survive without food and energy resources.

Pakistani authorities have failed to provide immediate economic relief to the people other than borrowing more loans from international financial bodies and countries. The State Bank of Pakistan had USD 16.608 billion in forex reserves at the end of January 2022 and it continued to decline throughout the year due to heavy external debt servicing and import financing, according to Financial Post.

With the release of the last tranche of an ongoing USD 6 billion International Monetary Fund (IMF) loan, Pakistan is hoping to receive billions of dollars in financial support from friendly nations, including China and Saudi Arabia, as per the Financial Post report. Furthermore, Pakistan might seek another loan from the IMF and request for the disbursement of the first tranche along with the withheld one.

Moreover, Pakistan is expecting to receive money in post-flood financial support from the international community. Pakistan raised more than USD 10 billion at a donors conference held in Geneva on January 10 even though Pakistan Prime Minister Shehbaz Sharif had originally raised a demand of USD 16 billion from global donors, as per the Financial Post report.

According to the news report, 90 per cent of these financial pledges were project loans that will be rolled out in the next three years. Pakistan's government has not released the terms of these loans, raising serious doubts over its repayment in the given timeline, which will add more financial burden on Pakistan's "dwindling economy."

To support Pakistan, Saudi Arabia has expressed willingness to deposit another USD 2 billion with the State Bank of Pakistan, after conducting a "study". Similar help is expected from China also, the report said.

All this financial help will only increase Pakistan's long-standing debt and its yearly debt servicing requirements. As per the news report, Pakistan will find itself trapped in foreign debt within years if it fails to increase its export of goods and reverse the declining trend in remittances.