What happens when your foreign reserves are depleted: A real world example.

[MH.Yang]

Wait a second. Hey folks, has any one ever heard of such an arrangement?

That amounts to $3 billion per year for Pakistan. Do you have a link to a news or an article where such an arrangement is mentioned?

It must be a part of a trade agreement where China pays Pakistan back in USD for the excessive trade deficit between Pakistan and China, right....?

You don't even know such an important agreement?

https://baijiahao.baidu.com/s?id=1601343006971787961&wfr=spider&for=pc&searchword=中国 巴基斯坦 本币交换

https://tribune.com.pk/story/2266678/pak-china-currency-swap-a-cure-for-dollar-dependency

In addition, Pakistan's largest importer is China, but the trade between China and Pakistan is not settled in US dollars. In other words, the depreciation of the PKR exchange the US dollar will not affect your largest import channel.

 

[Foinikas]

Turkey's foreign currency reserves were so low,Erdogan had been asking his people to exchange their foreign currency and gold for Turkish Lira.

Erdogan Urges Turks to Sell Gold to Support Collapsing Currency

Chairing his crowded party congress, which drew criticism on health grounds, President Erdogan appealed to people to sell foreign currencies and gold to prop up the tumbling lira.

balkaninsight.com

Turkey's Erdogan repeats call for citizens to convert forex, gold holdings

Turkish President Tayyip Erdogan called on Turks to convert their foreign exchange and gold holdings through financial institutions as a "win-win" strategy for the country and themselves, after an overhaul of the central bank sent the lira down nearly 12% in a week.

www.reuters.com

‘Where is the $128B?’ Turkey’s opposition presses Erdogan

The sum refers to the dollars sold by Turkey’s state banks to support its lira currency in foreign exchange markets.

www.aljazeera.com

There was a rumor,that after the Turks saved the Saraj government of Tripoli,they "picked" all the dollars in the Libyan Central Bank and transferred it to Turkey.

Turkey stole money from Libya to pay Sarraj's 'war bills'

According to Libyan economists, quoted by Al-Ain, Turkey is trying to control th...

atalayar.com

How Turkey Loots Libyan Money – MENA Research Center

mena-studies.org

 

[Arulmozhi Varman]

Thanks to China and Rajapakse corrupt family. I mean who in their mind will invest in a sleepy village for 2B within 4 years with a population of around 5-10k just cos it's the brothers birth place.

Every country including India told it's not feasible to invest and get returns. Guess who invested and got 99 year lease? The Modern Day colonial power China. And it has resulted in no competition, corruption and common Lankans would suffer.

 

[GumNaam]

So foreign reserves of Sri Lanka have declined from $8 billion two years ago to about $2.8 billion now. May be they have their own version of Ishaq Dar. Now they are facing food shortages and started rationing food items which are imported for most part.

They also do not have friends like Saudi Arabia & UAE to shore up their foreign reserves like they did for Pakistan in 2018.

There are some clowns on this board who keep spewing outlandish economic prophecies stating that foreign reserves have no impact on economy or prosperity. They can also learn a thing or two from this example ( and they are also free to look @ Lebanon and Venezuela) .


SriLanka declares economic emergency | Inside Story by Al Jazeera


Sri Lanka foreign reserves drop to US$2.83bn after bond repayment, liquidity injections


I am just puzzled, why our news media does not cover this story in Pakistan? Its not like Kashmir where supporting Kashmir cause would be like supporting PTI government, so most of media channels avoid that.

Sri Lanka should make trade agreements with Pakistan, China and Bangladesh to trade in their own local currencies...

eliminate dependance on usd is the phrase of the times...

 

[nang2]

So foreign reserves of Sri Lanka have declined from $8 billion two years ago to about $2.8 billion now. May be they have their own version of Ishaq Dar. Now they are facing food shortages and started rationing food items which are imported for most part.

They also do not have friends like Saudi Arabia & UAE to shore up their foreign reserves like they did for Pakistan in 2018.

There are some clowns on this board who keep spewing outlandish economic prophecies stating that foreign reserves have no impact on economy or prosperity. They can also learn a thing or two from this example ( and they are also free to look @ Lebanon and Venezuela) .


SriLanka declares economic emergency | Inside Story by Al Jazeera


Sri Lanka foreign reserves drop to US$2.83bn after bond repayment, liquidity injections


I am just puzzled, why our news media does not cover this story in Pakistan? Its not like Kashmir where supporting Kashmir cause would be like supporting PTI government, so most of media channels avoid that.

Export like your life depends on it.

 

[Crimson Blue]

You don't even know such an important agreement?

In addition, Pakistan's largest importer is China, but the trade between China and Pakistan is not settled in US dollars. In other words, the depreciation of the PKR exchange the US dollar will not affect your largest import channel.

I was not aware of the details of such an agreement.

Now when I think about it, I recall reading a news article few months ago (sorry cannot find the link) that bulk of trade between China & Pakistan is still happening in USD due to lack of capacity or capability of Pakistani banks. Report also mentioned that current government is looking ways to increase the trade in Yuan instead to USD.

May be another member who is more knowledgeable in this regard can share his view.

 

[Chhatrapati]

Apples and oranges. Sri Lanka is in this mess because of their stupid policy decisions. For example, the new President Rajapaksha one day woke up and thought, let's become 100% organic, so he banned pesticides. The results were obvious. Crop failing, export decline and food crisis where you're forced to import commodities you used to grow all this was made 10X worse by the Pandemic when tourists stopped coming. There is still time to reverse some of these decisions and they'll be fine in a year or two.

 

[TNT]

There is a need for countries like Pakistan, srilanka and others to reduce dependence on imports, atleast for important items like food and medicines. A self sustaining economy with minimal reliance on imports will always be more resilient.

 

[truthseeker2010]

Foreign exchange reserves should be higher than 23% of GDP.

It should be able to cover 9 month or more of your import bill. Which in pakistan's case would be at least 15% of gdp or ~$45 billion.

 

[Desprado]

Kisi ko pata ha ka Srilanka reserve income 50% depends on tourism ,which is banned? Pakistan ki kab foreign sa earning hoti ha? Stupid example ha.

 

[Zibago]

Kisi ko pata ha ka Srilanka reserve income 50% depends on tourism ,which is banned? Pakistan ki kab foreign sa earning hoti ha? Stupid example ha.

Apni degree ko ag laga do
Jahil admi tujhay ye nahi pata exports key zariye ham foreign sey earn kartey hein?
What kind of a moron would say something this stupid?

 

[doorstar]

Wait a second. Hey folks, has any one ever heard of such an arrangement?

That amounts to $3 billion per year for Pakistan. Do you have a link to a news or an article where such an arrangement is mentioned?

whether there is a written/advertised agreement or not the Chinese have been doing it for a while now. no dollars are involved. in exchange for rupees Pakistan gets CNY which it then uses to buy from China. China will use those rupees to buy from Pakistan once it has something to sell that china needs (like food-stuffs that are of international standards).

I tried posting this a few times over the past 2 years but PDFers especially indians and jehadi types shout me down.

it essentially amounts to a 3 billion dollar grant per year for 3 years starting 2019 to Pakistan from china as there is not yet anything in Pakistan which is worth that much that can be exported to China

 

[Bouncer]

The government has no business in doing business.

This.

But explaining this to voters is suicide for any politician. People have this built-in love for Government jobs as they are considered secure and easy. A lot of people think of Gov as an employer instead of a regulator. And changing this mindset is no easy task.

We have PIA, PSM and about a 100 more public sector entities that are bloated with political workers who are looking for a handout from the Gov.

 

[Nyayadhikari]

This.

But explaining this to voters is suicide for any politician. People have this built-in love for Government jobs as they are considered secure and easy. A lot of people think of Gov as an employer instead of a regulator. And changing this mindset is no easy task.

We have PIA, PSM and about a 100 more public sector entities that are bloated with political workers who are looking for a handout from the Gov.

Only a majority goverment has guts to privatize the non sovereign functions. Less about it guts, it is more about their DUTY towards the nation. If a majority government can't do it , who else will ? Someone has to do it before the losses incurred by Public Sector Units start dragging the economy down. In India , just like PIA, Air India is in huge losses. However here the government is trying to sell it but not getting any buyers ( as Air India has huge debts ). Govt should sell PSUs when it can else no one gonna buy them and public will foot the bill for incompetence and luxuries of employees.

 

[Desprado]

This happens only in Pakistan when you useless and zero value reserve

https://twitter.com/x/status/1437662087266844678