Pakistan's 'net reserves stand at minus $724m'

[xyxmt]

Allah Ham par meherbaan hai or baniya pareshan hai.

Qudrat e Pakistan

HaHa Ha Ha

 

[Chhatrapati]

Welcome to Pakistan.

Thanks there is no x times gdp to be added.

 

[Dalit]

It's funny that the inhabitants of one of the poorest nations in the world are worried about the state of the Pakistani economy.

India can't even feed its 1 billion plus population and provide basic necessities. Millions of Indians don't have a roof over their heads or even a toilet.

Indians need to worry about their own problems instead of worrying about others.

 

[volatile]

Dear sir, is this what goes by the name of economics in the Islamic Republic of Pakistan? Would you, sir, consider yourself an average student of the subject or does your level of intellect correspond to the crème de la crème, the top tier and the very best of your lot.

Just a curious neighbour; fare well, sir!

Come on do your self a favour say what you wanna say ,Importance of reserves are linked with balance of payment and thats it ,

 

[Thanatos]

Who cares , Pakistanis are much happier and satisfied than neighbors who have large forex reserves but no place to empty there bowels :p

 

[New World]

its a wonderful thing... its a very good thing to happen..

next step. rise import duties on vehicles, furniture and cosmetics...

Why should i worry

chachaji, worry ki koi baat nahy, aj neche to kal upar hongy ye reserve..

no worry mere taraf se aik green tea ka cup pe le..

 

[AZADPAKISTAN2009]

Na.waz ko bech do ...privatize kerdo

 

[ziaulislam]

No need to comment on fake news

 

[ziaulislam]

Those who want to know the reserves should simply go to sbp.gov.pk

 

[Ryuzaki]

Well,Pakistanis wanted CPEC,enjoy it now

 

[Clutch]

Well,Pakistanis wanted CPEC,enjoy it now

The negative reserves are definitely a concern...

However, I rather get rid of PIA , Pak Steel and other burdens than CPEC...

CPEC is a economic positive return generator in the long run with high initial costs... versus other foreign exchange burdens...

 

[Clutch]

Pakistan's 'net reserves stand at minus $724m'

SaPHOTO:EXPRESS

ISLAMABAD: In a disclosure that could jolt the country’s financial markets, the International Monetary Fund (IMF) has said Pakistan’s net international reserves after excluding its foreign exchange liabilities are negative $724 million.

In its first Post Programme Monitoring report, the global lender has exposed the shallowness of the current gross official $12.1 billion reserves, which are largely maintained by double booking of reserves and taking Chinese deposits under the currency swap arrangements.

As of February 14, Pakistan’s Net International Reserves stood at minus $724 million – down from $7.5 billion in September 2016 when the three-year IMF programme had ended, according to the IMF report released on Thursday.

It said that Pakistan’s foreign exchange liabilities were $13.5 billion as against its gross official reserves of $12.8 billion as of February 14.

However, the reserves further slipped to $12.23 billion by March 2, which means the net international reserves were negative $1.22 billion.

The IMF reached the minus $724 million net international reserves figure after it excluded the $5.4 billion loans that the State Bank of Pakistan had obtained through currency swaps, $6.3 billion IMF loans, $1.03 billion Chinese currency swaps and $700 million liabilities of other commercial banks.

Foreign exchange: SBP’s reserves fall $112m, stand at $12.2b

The gross $12.8 billion reserves were equivalent to 2.2 months of prospective imports cover, or 50% the IMF’s reserve adequacy metric.

This could also create problems for the government in arranging external loans, as international creditors would now ask for higher returns on their investments in Pakistani bonds.

“Maintaining a largely stable nominal exchange rate amid mounting external pressures has led to losses of international reserves,” said the IMF.

The IMF said that even the gross official foreign currency reserves declined despite significant external borrowing by the government, including several syndicated bank loans and issuance of Sukuk and Eurobonds worth $2.5 billion.

The IMF further said that if Pakistan remains unable to attract sufficient foreign capital inflows, its gross official foreign currency reserves may further slip to $9.37 billion by June this year.

In case of the baseline scenario, where the country will be able to get about $11.6 billion gross loans, its official gross reserves would be $12.1 billion by June, according to the IMF.

In both the scenarios, the IMF has projected a difficult year ahead. In case foreign inflows remain low, the IMF has predicted a 3% GDP growth rate for FY2018-19, which may increase to 4.7% provided Pakistan is successful in mobilizing the foreign inflows.

Foreign exchange: SBP’s reserves plunge $358m, stand at $12.35b

Current account deficit has been widening quickly, reflecting strong domestic demand amid an overvalued exchange rate, fiscal slippages, and an accommodative monetary policy stance, said the IMF.

The IMF has suggested that Pakistan should further tighten its monetary policy, ensure stronger fiscal discipline, and decisive efforts should be made to contain losses in public enterprises in order to address external imbalances and fiscal risks.

The IMF said Pakistan’s decision to control the import bill through administrative measures like imposing regulatory duties and maintaining cash margin requirements had limited effects, as the reserves continued to decline.

Despite the continued recovery of exports and some moderation of growth in imports, the current account deficit is expected to widen to $15.7 billion, which is equal to 4.8% of GDP this year, said the IMF.

The IMF said even in the medium term, current account deficit is expected to remain elevated at about 3.8% of GDP, “owing to continued real exchange rate misalignment and slow recovery of remittances”.

Dissenting note of Pakistan

The IMF has also shared Pakistan’s perceptive in its report, which shows that both the stakeholders had a difference of opinions on the exact quantum of reserves and current account deficit.

But the difference is not much, as Pakistan thinks its gross official reserves would be $1.8 billion higher than the IMF’s estimates.

“Pakistani authorities thought that (IMF) staff’s baseline scenario does not adequately reflect their recent policy measures” showed the report.

The IMF said that Pakistan believed that the new measures will generate a significant fiscal impact and restore the sustainability of balance of payments in the medium term.

Against the IMF’s projection of 5.5% budget deficit, the government believes that the deficit can be contained to 5% of GDP in this fiscal year.

In addition, a stronger impact of the recent exchange rate depreciation and other policy measures on trade balance could help contain current account deficit to 4.4% of GDP against the IMF’s projections of 4.8%.

With this, gross reserves could stabilise at about $13.9 billion this year and recover to 2½–3 months of imports in the medium term, according to Pakistan’s assessment.

https://tribune.com.pk/story/1661289/1-pakistans-net-reserves-stands-minus-724m/

Economy in good shape: Miftah

Khaleeq KianiUpdated March 17, 2018
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ISLAMABAD: Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Miftah Ismail said the national economy was in very good shape, and is expected to grow at a 10-year high of six per cent this year with inflation in the reasonable range of 3-4pc.

He said the tax collection by Federal Board of Revenue was also growing significantly, with both the sales and turnover increasing. He acknowledged the current account deficit was on the higher side but CPEC-related machinery imports were bottoming out as energy projects move to the completion stage.

“On the other hand, exports, foreign remittances and foreign direct investments are all growing and bringing in foreign exchange. On top of that, the government did not receive privatisation proceeds over the past many years which would start to flow from next year when the new government takes charge with full mandate,” the advisor said.

He said the country’s $12.5 billion in reserves were insufficient to meet debt repayments for the current year and dismissed that net foreign exchange reserves were in the negative as some wished to believe. He, however, pointed out that the International Monetary Fund (IMF) had a different methodology to look at Net International Reserves without taking into account its own loans.

ARTICLE CONTINUES AFTER AD
Based on such calculations, the net foreign exchange reserves should be treated as negative $50bn based on country’s $70bn debt and $20bn total reserves but one doesn’t need to look at the absolute numbers in this case. That, he said, was the reason that the debt limitation law talked about debt to GDP ratio and not about absolute debt numbers.

The advisor stressed that it was important that the size of the economy grows faster than debt to GDP ratio which was generally the case in Pakistan as the GDP is expected to grow by 6pc this year and 7-8pc in the coming years. “We need to maintain the right ratios and we are doing well there,” he said, adding that the external debt to GDP ratio was down from 24pc four years ago to 20.8pc now.

Miftah said singling out one indicator was also not fair, otherwise Japan’s debt was almost 120pc of GDP while many developing countries had 70-80pc debt to GDP ratios and were still doing well.

Calling the accusations of ‘artificial economic stability’ painted by former finance minister Ishaq Dar as unfair, he said the state of economy inherited by him was much worse and the improvement so far is visible to everyone.

Miftah said the health of some public sector entities was in poor shape, resulting in huge injections of public money every year that could otherwise be diverted to health, education, roads and social sectors for the public good. He justified the closure of Pakistan Steel Mills three years ago through gas supply disconnection, saying the company was consuming more than Rs2bn in the shape of cost of gas, salaries and other expenses with sales of around Rs850m, adding that its employee to production rate was 10 times greater than the rest of the world.

Responding to a question, he said the government had allocated Rs115bn tariff differential subsidy for power sector, of which Rs50-60bn had been paid, to be followed by Rs20-30bn payments by Monday next week and then Rs30bn in another 2-3 weeks. “The government was servicing circular debt parked in Power Holding Pvt Ltd through tariff while the fresh circular debt was not a big problem as a plan was already in place to ensure book entries and payments to independent power producers,” he continued.

Commenting on the upcoming budget, he said the focus would be to ensure lower inflation with high economic growth and job creation.

He conceded that the previous free trade agreement with China had some problems and hence the commerce ministry was extra-cautious to have detailed consultations with the local industry. The FBR had some reservations in terms of revenue loss over the next FTA with China but the prime minister ruled out these concerns and directed that the new arrangement should take into account the greater impact on economy in terms of which industries need to be protected or expanded rather than just the revenue.

Published in Dawn, March 17th, 2018

 

[v9s]

Well,Pakistanis wanted CPEC,enjoy it now

Could you please answer the following:

What composition of the import bill is Capital Equipment?

Also, what is the composition of foreign loans (i.e. foreign debt used for what purpose)?

And do we have any further external financing lined up?

From what i've briefly read, it is normal for a country to go through twin deficits during a phase of infrastructure development. If the deficit was caused by consumption spending, then I would be worried.

 

[Zee-shaun]

It's funny that the inhabitants of one of the poorest nations in the world are worried about the state of the Pakistani economy.

India can't even feed its 1 billion plus population and provide basic necessities. Millions of Indians don't have a roof over their heads or even a toilet.

Indians need to worry about their own problems instead of worrying about others.

No wonder India is such an unhappy nation. Har kisi ki chinta lagi rehti hai.