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Pakistan's foreign reserves slide continues

SunilM

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Pakistan's foreign reserves slide continues
The Newspaper's Staff Reporter
Updated January 19, 2018

KARACHI: The State Bank of Pakistan (SBP) reported on Thursday its foreign exchange reserves amounted to $13.69 billion on Jan 12, down $2.45bn from $16.14bn at the end of June 2017.

The dip comes despite $2.5bn borrowing from global bond markets at the end of November.

Static remittances, increasing trade deficit, insufficient rise in exports and relentless build-up of external debt are some of the reasons behind the softening position in the external account.

During the current fiscal year, Pakistan has also raised about $1bn through commercial short-term borrowing.

In view of a rising trade deficit coupled with slow growth in exports, the current account deficit has emerged as the biggest problem for economic managers. In the first five months of the current fiscal year, it rose 91 per cent year-on-year to $6.4bn.

The current account deficit hit a record high of $12.4bn in 2016-17, which hurt the external sector and put enormous pressure on the government to build reserves through more borrowing.

Going by the current trend, analysts believe the deficit can hit another high by the end of this fiscal year.

A recent report showed that foreign direct investment fell 3pc year-on-year in July-December.

Published in Dawn, January 19th, 2018

https://www.dawn.com/news/1383863
 
Wrong info the reserve were 20 billion in December 2017.

Indian situation is even worse than Pakistan

VBK-CONGRESS_ECONOMY_REPORT


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Wrong info the reserve were 20 billion in December 2017.

first see what kind of . utterly fudged figures have been provided by your own fugitive finance. minister ishaq. dar.. chuuna laga gaya poray mulk ko..
 
Look man I will start to bring in the current situation of Indian economy and like past threads by this poster all Indian will run away so please quit this propaganda or this will turn out to be a mess. You Indians really want to play it that way?


dude atleast our finance minister does not. fudge national accounts..

any data from Pakistan needa heavy international scrutiny as public officials like Ishaq Dar bring out extremely. fudged numbers
 
I have found many sane Pakistani's here who will make up their own mind on the issue of gross and net reserves. Also they know the issue of double counting. Anyways, This is the fudged figure apportioning SBP's reserve. The net reserves are 13.7-6.1 = 7.6 billion dollars. Thats less than 2 months of imports. Question is will this govt survive after Feb 18. And can a care taker govt issue bonds or approach IMF for emergency budgetary support?
 
Pakistan's foreign reserves will stop shriking when the country will start trading with China in RMB as China is Pakistan's biggest importer, the trade in RMB will relief pressure on dollar and Pakistan will be able to pay her loans/debt back without further borrowings.
 
I have found many sane Pakistani's here who will make up their own mind on the issue of gross and net reserves. Also they know the issue of double counting. Anyways, This is the fudged figure apportioning SBP's reserve. The net reserves are 13.7-6.1 = 7.6 billion dollars. Thats less than 2 months of imports. Question is will this govt survive after Feb 18. And can a care taker govt issue bonds or approach IMF for emergency budgetary support?
Relax !!!

Pakistan forex reserves will surpass $100 Billion once toll from CPEC trucks starts flowing in.

When our neighbour is least worried then why Indians should lose their sleep over the impending default.
 
Pakistan's foreign reserves will stop shriking when the country will start trading with China in RMB as China is Pakistan's biggest importer, the trade in RMB will relief pressure on dollar and Pakistan will be able to pay her loans/debt back without further borrowings.

Yes. However, in the meantime, the situation is going to get a lot more precarious. See the article below and it explains the current situation well. Also with oil at $70, payments for which has to be made in dollars, is causing significant pressure on the external account.

After debt repayments in coming months, SBP’s own net reserves will be a mere $4.5 billion
By Shahbaz Rana
Published: December 9, 2017
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The SBP has been using precious foreign currency reserves to defend an artificial exchange rate that finally adjusted by 1.4% on Friday. PHOTO: FILE

ISLAMABAD: Usable foreign currency reserves available with all commercial banks have slid to a mere $200 million, as the State Bank of Pakistan (SBP) has swished away $5.8 billion as short-term loans in an attempt to give an artificial sense of stability to the currency market.

As of August this year, the central bank borrowed $5.81 billion from commercial banks under the forward and currency swap arrangements, according to data SBP released on Friday after a delay.

On November 13, the central bank had assured The Express Tribune that it would make public short-term borrowing data of up to October by the end of November.


It appears that due to the increasing size of short-term loans that the central bank is desperately taking to camouflage reduction in its own reserves, it released the data only till end-August.

This amount is also shown part of both the central bank and commercial banks’ reserves, according to sources.

As of November 2017, the SBP’s official foreign currency reserves were $12.66 billion including $5.8 billion worth of currency swaps and forward contracts. Despite showing $5.8 billion as part of its own reserves, the SBP has also included the same amount in the total $6.01 billion reserves held by commercial banks.

By excluding $5.8 billion of short-term loans, the net usable reserves with the commercial banks stand at only $200 million. Out of $5.8 billion, $1.68 billion was obtained for one month, $2.46 billion for up to three months and $1.7 billion for up to one year, according to the SBP.

“This is clearly double counting of $5.8 billion. In principle, it should have excluded this sum from the commercial banks’ reserves,” said Dr Ashfaque Hasan Khan, former director general of Debt of Ministry of Finance.

In 1998, the then PML-N government had consumed foreign currency deposits of commercial banks after global powers imposed sanctions on Pakistan in retaliation to nuclear bomb explosions. However, to protect depositors’ reserves, the central bank had started separately reporting both the official and private currency reserves.

The SBP has been using precious foreign currency reserves to defend an artificial exchange rate that it finally adjusted by 1.4% on Friday. The Pak rupee-US dollar exchange rate in the interbank market closed at Rs107 as against Rs105.5 a day earlier.

“The exchange rate will continue to reflect the demand and supply conditions; and SBP stands ready to intervene, in case speculative and/or momentary pressures emerge, for smooth functioning of the foreign exchange markets,” announced the central bank on Friday.

But this announcement came only after the exit of former finance minister Ishaq Dar and amid pumping billions of dollars to defend the artificial exchange rate. The money that the central bank was losing to defend the exchange rate was being compensated by taking loans from commercial banks.

Sources said that the net foreign currency reserves of the central bank would stand close to $4.5 billion even after including $2.5 billion that Pakistan borrowed last month from international debt markets.

They said that the $5.8 billion amount has to be excluded from the SBP’s gross official reserves of $15.1 billion, which will bring down the reserves to $9.3 billion. Then another $4.8 billion have to be excluded on account of repayment of external debt in the coming months, they added.

The country is going to make bullet foreign debt repayments in the next couple of months, said the sources.

There was a massive increase in contracting short-term loans after the expiry of the International Monetary Fund (IMF) programme in September last year. During its three-year programme, the IMF had kept Pakistan under check by placing two main conditions. One was related to the Net International Reserves that is calculated by excluding the impact of currency swap loans. The other was on reducing the short-term loans obtained under currency swap arrangements.

Govt likely to raise only $1.5b through Eurubonds, sukuk issuance

When the IMF programme ended, the forward and currency swap-related obligations of the SBP amounted to $1.985 billion by June 2016. In a span of just 14 months, SBP’s exposure increased by 190%.

The country’s external sector remains under pressure due to exponential increase in trade deficit on back of declining exports and double-digit growth in imports. Pakistan’s current account deficit widened to $5.1 billion in just four months of this fiscal year, which was more than double than the previous year’s level.

Published in The Express Tribune, December 9th, 2017.

https://tribune.com.pk/story/157974...nths-sbps-net-reserves-will-mere-4-5-billion/
 
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