‘Forex reserves sufficient to meet debt repayment obligations’

ISLAMABAD: Pakistan’s current foreign exchange reserves are sufficient to meet the country’s debt repayment obligations and cater for import liabilities, the finance ministry’s spokesman said.

“Pakistan has never defaulted on its international liabilities and has catered for it liabilities even with lower levels of foreign exchange reserves in the past,” the spokesman said in a statement late Friday.

The ministry’s official said spot position of foreign exchange reserves should not be compared with the long-term liabilities of the central bank as liabilities are to be retired gradually over a period of five to 10 years time and not immediately in one installment.

“Net international reserves (NIR) position reflects foreign currency assets of the central bank as against its liabilities,” he said, referring to a wrong comparison that miscalculated NIR at minus $724 million.

“IMF’s (International Monetary Fund) loan for instance is to be repaid by the year 2026 meaning approximately $800 million repayment a year starting from 2018,” he added.

The finance ministry’s spokesman said foreign exchange reserves do not stay constant and are built on inflows through earnings from exports, personal transfers, foreign direct investments and earnings of the central banks, while loans and swaps are also part of international reserves of central banks.

“The government is committed to maintaining foreign exchange reserves adequate to fund 2 ½ to 3 months of imports,” he added. “Adequate financing is already in place to ensure maintaining the stability in foreign exchange reserves.”

The official said the decrease in foreign exchange reserves are mainly due to current account deficit of which imports are the main component.

The spokesman, however, said the negative trend in exports has bottomed out and government initiatives have shown positive result as exports increased around 12 percent, workers’ remittances improved 3.4 percent during July-February and the foreign direct investment grew 15.6 percent during the first eight months.

The official said current account deficit, which went beyond 210 percent in July, has been contained at 48 percent in July-January. “With these positive trends strengthening the current account deficit will improve in FY18.”

The finance ministry’s official, citing IMF’s latest report, said real GDP is estimated to grow at 5.6 percent in 2017/18 within favourable inflation environment. Inflation has been contained at 3.84 percent during July-February as against 3.9 percent in the same period last year.

The spokesman further said the government has been able to achieve fiscal consolidation without compromising development expenditures as fiscal deficit has been contained at 2.2 percent of GDP during the first half of the current fiscal year as against 2.5 percent in the same period of FY2017.

While public sector development program’s expenditures increased to Rs733 billion in FY2017 the allocation for the current fiscal year was one trillion rupee, he added. Federal Board of Revenue’s tax collection continued to show impressive growth above 17 percent during the July- February period.