By Mehtab Haider
ISLAMABAD: Pakistan’s precious foreign currency reserves are depleting and have touched $10.953 billion. Owing to increasing prices of petroleum products and failure of the incumbent regime to generate the additional envisaged resources of $3 billion during the outgoing financial year.
The foreign currency reserves stood at $11.178 million on May 31, 2008, which fell to $10.953 billion on June 7, 2008 as the reserves depleted by around $225 million in just a one week period.
The country’s reserves are rapidly depleting because of growing imports, especially the surge in oil prices, and dwindled to $10.953 billion, according to data released by the State Bank of Pakistan (SBP) on Thursday.
Out of the total $10.953 billion reserves, foreign reserves held by SBP stand at $8.386 billion, while net foreign reserves held by banks other than SBP are $2.566 billion. “This is an alarming situation because forward liabilities are also rising, so the real foreign reserves position is not comfortable,” said sources.
Official sources confided to The News that on one side the external debt was increasing and touched a new peak of $45.9 billion, while on the other hand the hard-earned foreign reserves showed a huge drop in recent months, making the national economy extremely vulnerable.
According to the Economic Survey 2007-09, the government has projected reserves position standing at over $12 billion in April 2008, which has now reduced to $10.953 billion on June 7, 2008, registering a decrease of over one billion dollars in the last two months.
The foreign investment attracted by Pakistan in the last fiscal year was over $8 billion, which included privatisation proceeds. But the investors would go out of the country with almost doubled dividends against their invested money. Thus, the investment also creates liabilities in one sense and there is a need to ensure an increase in foreign reserves for meeting future liabilities.
Pakistan’s foreign debt also swelled up by around $10.5 billion in the last six years, as it now climbed up to $45.9 billion at a time when the reserves are also depleting fast.
According to the SBP, the foreign currency reserves stood at $14.08 billion on Feb 15, 2008. The reserves position was much better a few months back as it stood at around $16.4 billion during October 2007. This shows that the reserves declined by around $6 billion in the last few months.
Sources also raised questions over the alleged ‘flawed policy’ being continued by the central bank for managing the precious reserves. According to them, Pakistan has parked a certain portion of its reserves, around $2.5 to $3 billion in international banks, on which the country is charging approximately 0.5 per cent interest rates.
While on the Eurobond and other papers launched by Pakistan in recent years, the country is paying 6 to 7 per cent interest rates to its subscribers. “There is no economic justification for this policy,” said the sources and added that Pakistan is a net loser of millions of dollars in the forex market.
Pakistan’s current account deficit widened in the outgoing fiscal year, resulting into growing pressure on foreign currency reserves. Official circles believe that there is an expectation of some inflows pouring into Pakistan before June 30, 2008, which will help improve the reserves position during the outgoing fiscal year.
Source: The News, 13/6/2008