Foreign reserves hit all-time high

The beginning of new fiscal year (2011-12) has brought good fortune for the dollar-hungry Pakistan, whose liquid foreign reserves yet again stand at an all-time high of $18.247 billion.
WB and Asian development bank release loans: The present increase according to State Bank was attributed to the most-awaited release of two separate tranches, accumulating to $ 411 million, by the World Bank (WB) and Asian Development Bank (ADB) under programme loans. According to State Bank of Pakistan (SBP) figures released on Thursday, during the week ending on July 2nd, the country’s foreign exchange reserves aggregated to the historic level of $18.247 billion. This exhibits an upsurge of $777 million or 4.4 per cent when compared with liquid reserves of $17.470 billion, the country held last week. During previous week the country’s dollar reserves had contracted by $53 million or 0.3 per cent against $17.523 billion in the preceding week. “This is the highest ever increase in dollar reserves of the country as well that of the central bank,” SBP chief spokesman Syed Wasimuddin told Pakistan Today.
IMF and US withhold payments: The latest transfer of tranches by two international lenders is bound to have comforted the economic managers in Pakistan who were dismayed by earlier statements of the loaning agencies including World Bank and Islamic Development Bank linking their loans to a Letter of Comfort to be issued by the International Monetary Fund (IMF). The long-awaited flow of financing to Pakistan from the IMF and Islamabad’s non-Nato strategic allies in Washington, however, seem to be far from materialization with the SBP spokesman having no good news on the Coalition Support Fund (CSF). “No, there is no report of funds transfer under the CSF,” Wasimuddin told Pakistan Today when asked if any other inflows, including that of CSF and IMF, were forthcoming. 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 US-led war against terror. Resource-constrained Pakistan would be starting to retire the half-paid $ 11.3 billion IMF loan from this financial year.
Forex boost to strengthen BOP: If sustained, the latest historic boost in the resource-constrained country’s dollar reserves would not only rid the country’s economic managers of their Balance of Payment woes, but also help the rupee remain strong in the money market against other currencies, specially the greenback. “The impact would be positive on rupee that would be able to sustain its present strong position against the dollar,” said a dealer in local money market. “The rupee would range between 85 and 87 against a dollar during the new fiscal year unless the government changes its policy and devalue it,” a currency dealer explained. He said that such a healthy trend in foreign exchange reserves would also augur well for country’s trade deficit during the FY12. Dollar inflows on account of exports and worker remittances, two major stimuli for Pakistan’s foreign exchange reserves, have so far been encouraging.
Central bank
reserves climb 5.4%: During the week under review, according to SBP data, the central bank’s reserves had climbed 5.4 per cent or $764 million to a historic level of $14.786 billion. The State Bank had possessed $14.022 billion during the last week, which were 0.6 per cent down when compared with $14.107 billion a week earlier. The week in review also saw dollar reserves of the commercial banks in the green zone to stand at $ 3.460 billion. Compared to $3.448 billion, this shows an increase of 0.3 percent or $ 12 million. “This week we saw the inflow of $411 million from the World Bank and the Asian Development Bank under programme loans,” said SBP chief spokesman Wasimuddin. Giving a breakup of dollar inflows, the SBP spokesman said that WB and ADB had, respectively, released $191.9 million and $190.8 million for the completion of various development projects in Sindh and Punjab provinces.
Foreign remittances rise by $2.031 billion: According to SBP statistics, during July-May FY11 the country’s exports stood at $22.781 billion against $17.883 billion from the corresponding period last year. Similarly, overseas Pakistanis during the same period had remitted $10.096 billion, compared to $8.065 billion of same period in FY10. Analysts, viewing this situation cautiously, suggest that Islamabad should take concrete steps to attract foreign investment into the terrorism-hit country which, they believe, happens to be the sole and sustainable solution to country’s balance of payment problems.