SBP’s reserves fall while those of commercial banks rise
By Mehtab Haider
ISLAMABAD: Pakistan has entered into a danger zone on the external economic front as its precious foreign currency reserves dwindled by $328 million during the last one week and reached $10.159 billion, it is learnt.
With existing level of foreign reserves, the country can pay import bill of just over one month. Economic managers are really worried over rapidly depleting reserves in the wake of rising petroleum and food commodities’ import bill.
Balance of payments’ vulnerabilities are increasing in the wake of falling foreign reserves, which is putting pressure on the rupee.
The State Bank of Pakistan has not given details of forward liabilities, which according to market sources have crossed $1.2 billion. So the real reserves, held by the central bank, have touched the lowest level in recent years.
The foreign currency reserves stood at $10.487 billion on July 26 and dropped to $10.159 billion in the week ended on Aug 2, recording a decrease of $328 million. According to Reuters, the State Bank said its reserves fell $48 million to $6.968 billion, while those held by commercial banks rose $151 million to $3.190 billion during the week.
“There are no inflows coming into the kitty, leading to more pressure on the rupee,” an official said here on Thursday.
Former minister of state of PML(Q) government Omar Ayub Khan told The News the current economic situation clearly indicated the rupee would further depreciate in coming weeks and if the existing situation persisted the currency would dip to Rs85 against the dollar from the present level of Rs73 in one and a half months.
Last fiscal, the government met its financing gap of $5.5 billion by utilising foreign currency reserves, which stood at $16 billion in November 2007. However, the reserves have now declined to $10.15 billion.
This year, total financing gap will be around $16.5 billion against envisaged inflows of around $10.5 to $11 billion. So the country cannot afford to use its foreign reserves anymore and economic managers will have to do something to avert the threat of default.
The possibility of Saudi oil facility worth $5 billion could provide some relief in the current economic and political crisis as uncertainty is triggering capital flight from the country.
Independent economic analysts believe if the Saudi facility is not received in the next few weeks, then Islamabad will have to think seriously about approaching the International Monetary Fund during the second half of the current fiscal year.
Source: The News, 8/8/2008