SBP's foreign currency reserves now stand at meagre $9.66b

[SunilM]

SBP's foreign currency reserves now stand at meagre $9.66b

KARACHI:

Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased 5.86% on a weekly basis, falling below the $10-billion mark, according to data released by the central bank on Thursday.


Last week, foreign exchange reserves increased due to official inflows. However, this week reserves were back to the declining trend, sparking concern over Pakistan’s ability to meet future payment obligations and manage a bulging current account deficit.

On June 22, foreign currency reserves held by the central bank were recorded at $9,662.5 million, down $601.8 million or 5.86% compared with $10,264.3 million in the previous week.



The decrease has been attributed to external debt servicing and other official payments.

Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,243.9 million. Net reserves held by banks amounted to $6,581.4 million.

In April, the SBP’s reserves increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.

A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).

In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.

https://tribune.com.pk/story/1745033/2-sbps-foreign-currency-reserves-now-stand-meagre-9-66b/

 

[Samlee]

Arey Sunil Bhai Bari Lambi Umar Hai Aap Ki

Indian rupee hits record low amid inflation, credit downgrade
Currency weakened past 69 rupees to the dollar, making it one of the worst performers in Asia for the first time.

The Indian rupee on Thursday weakened past 69 to the dollar for the first time, slumping to an all-time low amid a spike in crude oil prices, foreign capital outflows and a widening current account deficit.

Last week rating agency Standard & Poor's cut the country's credit rating outlook to "negative".

The Indian currency, which slid 0.7 percent to as much as 69.0925 per dollar in early trade, is one of the worst performers this year among Asiancurrencies, falling by nearly seven percent so far.

The Indian currency had touched its previous record low of 68.8650 per dollar on November 24, 2016.

READ MORE
India's economy falters under Modi
Asia's third-largest economy is battling inflation and a widening current account deficit stoked by high oil prices. This, in turn, is adding to selling pressure on the Indian currency.

Current account deficit is a measurement of a country's trade where the value of its imports exceeds the value of its exports.

India's January-March current deficit widened to $13bn from $2.6bn a year earlier.

India imports more than two-thirds of its fuel needs and higher crude prices pose significant risks for the Indian economy.

Last month, the Organization of Petroleum Exporting Countries' (OPEC) agreement to restrict their oil output by 1.8 million barrels of oil per day (bpd) saw crude oil prices rising to $80 a barrel for the first time since 2014.

This year has also seen a sustained outflow of foreign funds from Indian debt and equity markets.

In 2018, total outflows until now from bonds and shares stood at $6.6bn, according to a Reuters news agency report.

Sanctions and tariffs
Since January, foreign investors have reduced holdings of rupee-denominated government and corporate bonds by $6.1bn, and pulled $785m from equities.

Foreign institutional investors (FIIs) taking money out of India is a big problem, economist Mohan Guruswamy told Al Jazeera.



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"Several reasons are contributing to the rupee slide - fear of the US sanctions and tariff wars, the increasing trade gap, and FIIs pulling out owing to demand for dollars," Guruswamy said.

Concerns have been mounting over the US threats to sanction countries, including India, that do not stop importing oil from Iran by November 4.

India must decrease dependence on Iranian oil imports, US envoy to the United Nations Nikki Haley said in New Delhi on Wednesday after meeting Indian Prime Minister Narendra Modi.

The international oil benchmark Brent surged to $77.33 a barrel on Thursday.

Modi is struggling to jump-start economic growth and jobs in advance of seeking a second term in a general election due by May 2019.

His campaign promises of development and "better days" to come have failed to deliver new jobs. Modi had vowed to create jobs for 10 million youths each year but he has fallen short on his promise.

India's jobless rate stood at 5.29 percent in May, data compiled by Centre for Monitoring Indian Economy showed.

"Economic growth is undoubtedly slowing, investment is on a slide, commercial credit is declining," said Guruswamy, a former economic adviser to the federal government in the late 1990s.

"The Reserve Bank of India [the country's central bank] will have to intervene for macroeconomic reasons and for political reasons as the opposition is bound to attack the government over the rupee's record low," he added.

https://www.aljazeera.com/news/2018...flation-credit-downgrade-180628092815613.html

 

[El Sidd]

Sunils out again.

 

[SunilM]

Pakistan’s gross borrowing requirement stands between 27-30 percent of GDP: Moody’s

Pakistan (B3 negative) alongside Argentina (B2 stable), Ghana (B3 stable), Mongolia (B3 stable), Sri Lanka (B1 negative), Turkey (Ba2 RUR-), Zambia (B3 stable) are the most vulnerable to a US dollar appreciation

LAHORE: Moody’s in a report released on Thursday said Pakistan’s gross borrowing requirement was amongst the highest in its sovereign list, standing between 27 to 30 percent of GDP.

The report shared an appreciation of the dollar had caused a sharp currency depreciation and a major decline in foreign exchange reserves for emerging and frontier market countries.

The credit rating agency said Pakistan was facing increased external pressures arising from strong domestic and capital import heavy investments under China-Pakistan Economic Corridor (CPEC).

It projected the current account deficit for the financial year 2017-18 to be 4.2 percent of GDP and reserve coverage of external debt repayments was sufficient for now but projected it to erode.


It added until a major improvement in capital inflows wasn’t recorded, there was a high risk of foreign exchange reserves of further diminishing.

Moody’s report stated 30 percent of government debt was denominated in foreign currency and the country’s gross borrowing requirement was amongst the highest in its list, standing between 27 to 30 percent of GDP.

The credit rating agency highlighted this was fueled by persistent fiscal deficits and the government’s dependence on short-term debt, with an average maturity timeframe of 3.8 years.

Also, Moody’s said the country wasn’t a major recipient of volatile capital inflows and rupee depreciation to address external pressures could increase inflation and force further domestic rate hikes by the State Bank of Pakistan (SBP).

The hike in domestic rates by SBP would eventually be passed through to the government’s borrowing costs and further erode the government’s already fragile fiscal position, said Moody’s.

Earlier this month it was reported current account deficit in the first 11 months of 2017-18 amounted to $15.9 billion, up 43.2 per cent from the previous year.

According to data released by the central bank, the gap was $1.9 billion in May. This was nominally down from the preceding month, data showed.

The current account tracks a country’s overseas transactions, such as net trade, earnings on cross-border investments and transfer payments.

Exports of goods amounted to $22.8 billion in July-May, up 13.2 per cent from a year ago. However, the corresponding rise in imports which were worth $50.7 billion, remained 16.4 per cent over the same period.

Exports have mostly grown at a single-digit rate since 2010-11. A recovery in advanced economies from the second half of 2017 with the United States experiencing one of the fastest quarterly growth rates in the last three years, played a key role in the recent surge in exports, according to the SBP.

It boosted demand for products exported by emerging economies, including Pakistan, it said.

Last month, data released by SBP revealed Pakistan’s external debt and liabilities have risen over 50 percent or around $31 billion in nearly five years of the previous government’s tenure.

Adding insult to injury, Pakistan’s external debt and liabilities skyrocketed to a record high of $91.8 billion till the end of March and this figure for external debt and liabilities is 50.6 percent higher or increased by $30.9 billion compared to June 2013 when the PML-N took reins of the government.

From the total external debt and liabilities, government’s public debt including foreign exchange liabilities stood at $76.1 billion by end of March 2018.

Public debt linked obligations in almost five years’ time has risen by 42.5 percent or $22.7 billion, revealed SBP data.

According to the report, these currency variations reveal capital outflows or notably lower external inflows and termed them credit negative for sovereigns with huge external funding requirements.

Moody’s analyzed the vulnerability of a group of emerging and frontier markets to a strengthening US dollar and termed Pakistan (B3 negative) alongside Argentina (B2 stable), Ghana (B3 stable), Mongolia (B3 stable), Sri Lanka (B1 negative), Turkey (Ba2 RUR-), Zambia (B3 stable) the most vulnerable to a US dollar appreciation.

The report added nations with huge current account deficits, major foreign-currency government debt and high external repayments were the most susceptible.

Moody’s said “The US dollar has appreciated by nearly 6% in trade-weighted terms since mid-April, while capital flows to emerging markets have slowed. Although we expect only a moderate further appreciation of the US dollar, the US Federal Reserve’s balance sheet shrinking may have further implications for external financing conditions in emerging markets.”

“Economies rely on capital inflows to meet import payments and repay external debt. When risk appetite weakens, investors tend to their portfolios away from the economies most reliant on such capital inflows, in particular, those with low reserve buffers. In turn, lower capital inflows erode foreign exchange reserves, potentially starting a negative feedback loop”, said Moody’s.

And the credit rating agency added “In addition to the balance of payments considerations, governments with a large share of foreign currency-denominated debt will see their debt servicing costs increase when the local currency depreciates.

When debt affordability is already weak, and reliance on short-term debt high, refinancing a higher debt burden at higher costs exacerbates pressure on the sovereign’s fiscal strength. Moreover, when the central bank needs to raise interest rates in order to mitigate the depreciation of the currency, higher external financing costs spill over into higher domestic financing costs.”

https://profit.pakistantoday.com.pk...t-stands-between-27-30-percent-of-gdp-moodys/

 

[Theparadox]

Banks refuse to pay in foreign currency

Commercial banks have refused to pay foreign currency account holders in international currency while State Bank of Pakistan insists that government has not frozen foreign currency accounts.

The account holders who receive their salaries from foreign companies have been denied payments in international currencies.

"I went to bank to get money from my dollars account but the bank refused to pay me and said I can only get my payments in local currency at interbank rates," said Zulfiqar Ahmed an account holder of a commercial bank.

The interbank rates of foreign currency are lower than open market rates.

It was learnt that banks have told all foreign currency account holders who have been doing business with foreign companies and getting their payments in foreign currency, that they would be paid in rupees and not in dollars or other currency. The banks have told consumers that their accounts have been frozen on directives of the SBP.

When contacted to have information about the details of the SBP's directives, the State Bank's spokesman Dr Abid Qamar denied any directive to freeze foreign currency account.

However, the commercial bank officials insisted that they cannot implement any regulations without approval of State Bank of Pakistan and insisted that there are orders of the State Bank issued in recent past and after Financial Action task Force (FATF) move to blacklist the country the order has been implemented in latter and spirit.

They also told account holders to furnish a letter from their foreign employers or business partners to continue their foreign currency accounts, however they will be paid in local currency at interbank rates.

In 2016, after a dip of US dollar in open market, the then finance minister Ishaq Dar, reportedly suggested former prime minister Nawaz Sharif to freeze all foreign currency accounts in Pakistan but the insiders insist the move has been approved by outgoing Abbasi's government.

The foreign currency accounts were first seized in 1998 after Pakistan conducted nuclear tests.

The accounts were frozen by then ruling PMLN government, to secure the country from a sovereign default, owing to the looming economic sanctions by international powers who were opposed to nuclear tests.

It was also aimed to stop foreign currency flight to other countries but it not only bought bad name for the country but also resulted in severe financial penalties.

A number of foreign businesses including banks shut their businesses in Pakistan and the overall trust of business community was shaken irreparably.

 

[SunilM]

Banks refuse to pay in foreign currency

Commercial banks have refused to pay foreign currency account holders in international currency while State Bank of Pakistan insists that government has not frozen foreign currency accounts.

The account holders who receive their salaries from foreign companies have been denied payments in international currencies.

"I went to bank to get money from my dollars account but the bank refused to pay me and said I can only get my payments in local currency at interbank rates," said Zulfiqar Ahmed an account holder of a commercial bank.

The interbank rates of foreign currency are lower than open market rates.

It was learnt that banks have told all foreign currency account holders who have been doing business with foreign companies and getting their payments in foreign currency, that they would be paid in rupees and not in dollars or other currency. The banks have told consumers that their accounts have been frozen on directives of the SBP.

When contacted to have information about the details of the SBP's directives, the State Bank's spokesman Dr Abid Qamar denied any directive to freeze foreign currency account.

However, the commercial bank officials insisted that they cannot implement any regulations without approval of State Bank of Pakistan and insisted that there are orders of the State Bank issued in recent past and after Financial Action task Force (FATF) move to blacklist the country the order has been implemented in latter and spirit.

They also told account holders to furnish a letter from their foreign employers or business partners to continue their foreign currency accounts, however they will be paid in local currency at interbank rates.

In 2016, after a dip of US dollar in open market, the then finance minister Ishaq Dar, reportedly suggested former prime minister Nawaz Sharif to freeze all foreign currency accounts in Pakistan but the insiders insist the move has been approved by outgoing Abbasi's government.

The foreign currency accounts were first seized in 1998 after Pakistan conducted nuclear tests.

The accounts were frozen by then ruling PMLN government, to secure the country from a sovereign default, owing to the looming economic sanctions by international powers who were opposed to nuclear tests.

It was also aimed to stop foreign currency flight to other countries but it not only bought bad name for the country but also resulted in severe financial penalties.

A number of foreign businesses including banks shut their businesses in Pakistan and the overall trust of business community was shaken irreparably.

Which means capital controls are kicking in. It could also be that commercial banks have no dollars. I have been saying that SBI is fudging the forex figures i.e the amount with the commercial banks stand loaned to SBP to inflate its reserves while at the same time the same amount is shown as lying with the commercial banks. Clearly, SBP will be exposed now in the Internation community where it matters.

 

[PurpleStone]

Pakistan is China's Israel and it has trillions of dollars of reserves.

 

[SunilM]

Just look at the Brilliant Minds at work in Pakistan. Or Maybe its just desperation now.....

Federal Board of Revenue (FBR) former chairman Dr Muhammad Irshad said.....

“This is why I suggest the government extend the existing amnesty scheme and provide more facilities to oversee Pakistanis convincing them to transfer assets to Pakistan. Let the Pakistani diaspora enjoy facilities even if undue. The country needed desperately needed dollars,”

This guy is responsible for collecting taxes and ensuring compliance and prosecuting those who don't pay taxes.

https://profit.pakistantoday.com.pk...cus-on-amnesty-as-fatf-puts-pak-on-grey-list/