After hitting an all-time high of $18.247 billion last week the country’s dollar reserves eased down by 0.06 per cent or $12 million to $18.235 billion during second week of the new fiscal year, 2011-12. During last week that ended on July 2nd, the country’s foreign exchange reserves climbed to a record $18.247 billion. The historic increase, according to SBP spokesman, was due to the long-awaited release of two separate tranches by the World Bank (WB) and Asian Development Bank (ADB), accumulating to $ 411 million, under program loans. The WB and ADB had, respectively, transferred $191.9 million and $190.8 million for the accomplishment of various development projects in Sindh and Punjab provinces.
During the current week that ended on July 16, the central bank figures show, SBP’s holding of dollar reserves contract by 0.5 per cent or $75 million to stand at $14.711 billion. Last week, the State Bank too had possessed a record foreign exchange reserves worth $14.786 billion, witnessing an upsurge of 5.4 per cent or $764 million against $14.022 billion of the preceding week. The week under review, however, saw the commercial banks succeeding to keep their dollar reserves in the green zone. The central bank calculated dollar reserves of the banks other than SBP at $3.523 billion, up $63 million or 1.8 per cent from $3.460 billion of the previous week. According to SBP chief spokesman Syed Wasimuddin, such ups and downs in the banks’ liquid foreign reserves are because of routine repayment of debts by the government and cash withdrawals by account holders of commercial banks. So far comforted by the healthy dollar inflows on account of exports, remittances and the WB and ADB transfers under program loans, Pakistan’s economic managers must have raised their eyebrows over Thursday’s hard statement of the US House Committee linking the future American aid and assistance to a complete cooperation from Islamabad on the US’s agenda on War on Terror.
A subsequent rejection of the aid-cut proposal, which was in the shape of a bill, by the US Congress Panel might have relaxed the economists in Pakistan. The Americans have already curtailed the provision of $800 million from its $3.2 billion Coalition Support Fund (CSF) that Washington owes to Islamabad on account of expenses incurred by the latter in fighting terrorism on its soil. The long-delayed inflow of financing to Pakistan from the IMF and Islamabad’s non-Nato strategic allies in Washington seems to be far from materialization at least in the foreseeable future. The IMF and the US have withheld over $3 billion and $350 million to be paid to Islamabad, respectively, under 2008’s $11.3 billion stand-by arrangement and the expenses incurred by Pakistan in the US-led war against terrorism.
Pakistan would be starting to retire the half-paid $11.3 billion IMF loan from this financial year, FY12. Though the latest historic boost in the resource-constrained country’s foreign exchange reserves is widely expected to help Islamabad rid its BoP woes, absence of foreign financing during FY12 would render the funds-starved government completely dependent on domestic financers. Economic observers suggest that the government should create a conducive environment for foreign investment in the country which, they believe, is the only permanent solution to the country’s Balance of Payment problems. It is estimated that in the last decade Pakistan has incurred costs of $68 billion and in return has received a paltry amount of $17 billion in aid from the foreign community.
