Forex reserves cross $17 billion again


Following a declining trend for the last four consecutive weeks the country’s foreign exchange reserves exhibited a recovery. Whereas, Pakistan’s inflated oil and food import bills totaled $32 billion during July-April FY11 and are widely expected to eat away the inflation-ravaged country’s healthy dollar reserves, the latter seem set to show a seesawing trend in the weeks ahead. According to data released by the State Bank of Pakistan on Thursday, the country’s foreign exchange reserves once again rose by $99 million or 0.5 percent to $17.065 billion during the week that ended on May 21.
This upward trend in foreign exchange reserves came after four weeks of persistent falls that saw the country’s dollar holdings shrinking on weekly basis to $17.179 billion on April 23, $17.107 billion on April 30, $17.008 billion on May 7 and $16.966 billion on May 14, the preceding week. On April 2, it hit a historic high of $17.637 billion, the country’s foreign reserves had seen the last positive almost a month back on April 6 by accumulating to $17.376 billion, registering a growth of $ 58.8 million or 0.33 percent.
This week, however, augured well for the cash-strapped country with the State Bank on Thursday reporting a $99 million increase in total liquid foreign reserves standing at $17.065 billion.
The week under review also saw an upward trend in greenback holdings of the central bank. The State Bank counted its dollar reserves up to May 21 at $13.669 billion, exhibiting an upsurge of $113 million or 0.8 percent when compared with $13.556 billion of last week. Commercial banks’ possession of the greenback, however, remained negative and contracted to $3.396 billion against $3.410 billion of the previous week.
State Bank Chief Spokesman Syed Wasimuddin attributed this to ‘nominal’ contractions in the banks’ foreign exchange reserves to routine withdrawal of cash by the account holders. Given the healthy dollar inflows to the country on account of exports and worker remittances, economic managers are expecting that record dollar reserves would rid Pakistan of its balance of payment woes at least during the ongoing fiscal year. But, analysts have long warned the government against complacency saying the present trend is not sustainable. They contend that the root causes of soaring foreign exchange reserves, namely exports and home remittances, were transient in nature. Most analysts attribute the healthy exports and home remittances, respectively, to international price hike in Pakistan’s major exportable commodities like cotton and rice and a fragile security situation in the Middle East and North African (MENA) region seeing a domino impact in terms of political uprising. The Federal Bureau of Statistics (FBS) data show that Pakistan had to pay over $32 billion for the oil and food products imported during July-April FY11. The country’s oil and food imports bill in the corresponding months of FY10 had aggregated to $ 24 billion only.
Analysts insist that the inflated bill should have engendered caution as expenditure drained $8 billion out of the country’s dollar reserves on account of imports. The government also might feel concerned that the country will start servicing of the $11.3 billion IMF’s Stand-By Arrangement loans during the next fiscal year.