How Can Pakistan Build Up and Manage Dollar Reserves?

[bafxet]

The duffer economic managers will always let us down. The economy of tgis country has been surviving on Aid, IMF and Bonds. It is not a matter of a year or two it is going on for last 25 years and during this course other countries have gown leaps and bond. I really wish that US instructs IMF to decline GoP bail out. We will never learn until this cheap money continues flowing our way....

 

[AyanRay]

No Not Necessary.What You Call Foreign Investments Most Of It Is Actually External Commercial Borrowings By Your Corporations Taking Advantage Of Low Interest Rates In The West.

Actually It Is Pretty Smart Way To Build Reserves Without Going To IMF But It Still Makes One Vulnerable???And The Trouble With India Is That It Has Developed A Dangerous Addiction To Foreign Capital Inflows.Even Slowing Down Of These Inflows Has Ramifications For India's Economy.

Everything has its risks. If you are too much dependant on exports, global downturns can hurt you and put millions out of jobs. The good thing about India's external debt is that they are denominated in rupee. So a fall in the value of rupee would mean lesser dollar outflow at the time of repayments. And as I explained earlier, foreign loans helps us to have a BOP surplus. Our current account defecit is very much manageble due to services surplus and remittances.

 

[Samlee]

Everything has its risks. If you are too much dependant on exports, global downturns can hurt you and put millions out of jobs. The good thing about India's external debt is that they are denominated in rupee. So a fall in the value of rupee would mean lesser dollar outflow at the time of repayments. And as I explained earlier, foreign loans helps us to have a BOP surplus. Our current account defecit is very much manageble due to services surplus and remittances.

ECBs and Foreign Currency Bonds Are Never Are Never Denominated In Rupees.Foreign Currency Debt Make Up Forex Remember Forex Reserves Are Never In National Currency.Yes Exports Are Vulnerable To Global Market Fluctuations But Earning Surpluses Through Exports Is The Way China Built It's Reserves.And This Is What Makes Them Relatively Less Vulnerable.But This Is Where India Is Extremely Vulnerable.Remember The Taper Tantrum??????

Oh and Loans Never Give You A BOP Surplus They Give You A Capital Account Surplus.Remember The Difference.

 

[VCheng]

Why does Pakistan not just adopt the Yuan and Euro and be free of the USD once and for all? There is sufficient strength to those two alternatives already and the trends only show the USD decreasing in its importance.

 

[AyanRay]

ECBs and Foreign Currency Bonds Are Never Are Never Denominated In Rupees.Foreign Currency Debt Make Up Forex Remember Forex Reserves Are Never In National Currency.Yes Exports Are Vulnerable To Global Market Fluctuations But Earning Surpluses Through Exports Is The Way China Built It's Reserves.And This Is What Makes Them Relatively Less Vulnerable.But This Is Where India Is Extremely Vulnerable.Remember The Taper Tantrum??????

Oh and Loans Never Give You A BOP Surplus They Give You A Capital Account Surplus.Remember The Difference.

Bonds sold by Indian companies in stock exchanges bought by FIIs are rupee dominated.

US dollar denominated debt continued to be the largest component of India's external debt with a share of 49.5% at end-March 2018, followed by the Indian rupee (35.8%), SDR (5.5%), Japanese yen (4.8%) and euro (3.4%).

https://www.google.co.in/amp/s/wap....-7-billion-end-march-2018-118062900763_1.html

36% is not a small share.

Secondly you don't have any idea what balance of payment is. BOP is nothing but current account+capital account. We have a very manageble current account defecit of less than 2% of our GDP, the capital flows leads to a BOP surplus. Hope you understand it now.
And unlike in Pakistan, the capital inflows are not used to repay old debts but rather used to create real assets and jobs here.

 

[American Pakistani]

Goods and stuff that are useless and luxury and can be made in Pakistan should be banned from being imported. Invest more on electric cars and transportation to cut oil imports too.

It is not a hard fix but politicians have made it that way.

 

[Samlee]

Bonds sold by Indian companies in stock exchanges bought by FIIs are rupee dominated.

US dollar denominated debt continued to be the largest component of India's external debt with a share of 49.5% at end-March 2018, followed by the Indian rupee (35.8%), SDR (5.5%), Japanese yen (4.8%) and euro (3.4%).

https://www.google.co.in/amp/s/wap....-7-billion-end-march-2018-118062900763_1.html

36% is not a small share.

Secondly you don't have any idea what balance of payment is. BOP is nothing but current account+capital account. We have a very manageble current account defecit of less than 2% of our GDP, the capital flows leads to a BOP surplus. Hope you understand it now.
And unlike in Pakistan, the capital inflows are not used to repay old debts but rather used to create real assets and jobs here.

Actually I Do But Perhaps I Couldn't Choose My Words Correctly,What I Meant To Say Is That Loans Are Not A Dependable Source For Surplus B'Coz They Are Someones Else's Money Ultimately Interest Payments Repatriations Of Profits and Dividends Strains Your Current Account.

And Even Those Rupee Bonds Will Mature One Day Then They Will Be Converted Into Dollars And Repatriated.Then What Will You Do??????

And Here Is The Thing With Building "Balance of Payment" Surplus With Capital Inflows.That Capital Is Not Your Money And When You Try To Finance Current Account Deficits With Forex Reserves,You Need Constant Capital Inflows To Maintain Those Reserves.The Problem Is India Is Not Maintaining Those Inflows.That Is Why Rupee Is Depreciating

Hope I Clarified Myslef