KARACHI – With economic observers quite skeptical about its benefit for the ailing economy, the country’s 0 reserves have once again swelled to a record high and are less than $40 million away from hitting the $18 billion mark. Economic observers, however, see limited or no major impact of the soaring but ‘frozen’ dollar reserves on the country’s troubled economy. According to data released by the State Bank of Pakistan (SBP) on Thursday, the country’s total liquid foreign reserves swelled by $348 million or 1.9 percent to $17.956 billion during the week ending on March 26. In the previous week that ended on March 19, the country held $17.496 billion, down slightly by 0.63 percent against a record $17.608 billion in the preceding week.
The week under review, however, saw an across-the-board increase in the foreign exchange reserves with the central and commercial banks reporting to possess higher dollar reserves. This week, the State Bank declared that it held $14.541 billion against $14.092 billion during the previous week, registering a growth amounting to $449 million or 3.1 percent. Likewise, according to SBP figures, the foreign exchange reserves of the commercial banks also ballooned to over $3.414 billion, exhibiting an upsurge of $10 million or 0.29 percent when compared with $3.404 billion that the banks possessed a week earlier.
The present upward trend in the country’s foreign exchange reserves is attributed to higher inflows of the greenback on account of worker remittances and the country’s exports fuelled by in particular the soaring prices of textile products that Pakistan’s economic managers expect, are all set to cross the historic $11 and $22 billion mark, respectively, during the financial year ending on June 30 2011. While the cash-strapped government is cheered by the accumulation of higher dollar reserves, economic observers are less pleased. Analysts are critical of Islamabad’s lukewarm approach toward the usage of the healthy foreign exchange reserves which, they fear, will be of limited benefit to the ailing economy.
“The only benefit of the increasing foreign reserves is that the rupee is not sliding,” said Asfar bin Shahid. The analyst said tough increasing the country’s foreign exchange reserves were frozen and were, therefore, of no use to the troubled economy. “The dollar reserves should have been committed to the economy and in circulation, because if there is a freeze, it means no benefit to the economy,” Shahid suggested. The analyst was also unconvinced that the government should be given credit for the current increase in dollar reserves and said the trend was explained by rising worker remittances and exports. “Increased prices of cotton in international market pushed the exports receipts up so what is the government’s input?” he queried.
