ISLAMABAD: Pakistan’s official foreign currency reserves have decreased to lowest ebb by touching $2.9 billion and putting pressure on exchange rate and causing price hike on imported items.
This peculiar situation is moving rapidly towards the worst scenario as exchange companies have threatened to go on strike for indefinite period if the central bank remained unable to provide them foreign currency from next week.
All this happening on economic front is going on when the country is under the IMF’s sponsored $6.67 billion program under 36 months Extended Fund Facility (EFF).
This is quite awkward program devised by the IMF as instead of restoring confidence it has caused serious threats of default to the economy. The foreign currency reserves are depleting mainly because of net outflow of dollars as so far the IMF has provided $547 million as first tranche after approving the program but got back around $1.1 billion in first five months of the current fiscal year.
The foreign currency reserves will face more depletion in next month (December) as foreign inflows are still in danger and the government had to repay three small instalments to the tune of $300-$350 million in this period.
According to State Bank of Pakistan (SBP) spokesman, total foreign currency reserves stood at $8.7 billion of which the reserves held by the SBP stood at $3.4 billion and reserves held by commercial banks at $5.3 billion on November 22, 2013.
This alarming situation has further deepened as multilateral donors such as the World Bank and Asian Development Bank linked their budgetary support of over $1.5 billion with full implementation on condition attached to the IMF program. It is now expected that these international donors will disburse budgetary support in last quarter (April-June) period of the current fiscal year, making it difficult for the economic managers to manage external accounts in efficient manner.
On immediate basis, the government has left with no other viable options but to go ahead with off loading shares of banking and energy sector without wasting time. The government, they said, would also move ahead for launching Global Depository Receipts (GDRs) of OGDCL in London Stock Exchange in months ahead.
The government is also moving towards launching Eurobond worth $500 million. The government is also negotiating with the UAE rulers to get stuck up amount of $800 million from Etisalat on privatisation deal of PTCL.
On November 26, 2013, Pakistan paid the 24th Instalment under IMF/SBA facility amounting to SDR (Special Drawing Rights) $258 million, equivalent to $396 million. With repayment of this latest instalment, Pakistan to-date has repaid to IMF $6,045 million since Jul-2011, of which $ 5,256 million was under SBA facility. After the current repayment, remaining amount due under IMF/SBA until Sep-2015 is SDRs 1,484 million.