Forex reserves continue to drop despite borrowing $7.6b

ISLAMABAD: Despite obtaining loans of $7.6 billion from all creditors in the current fiscal, Pakistan’s foreign currency reserves held by the State Bank of Pakistan (SBP) continued to decline, leaving no option for the government but to use policy choice for allowing adjustments in exchange rate to halt depletion of reserves at accelerated pace.

Pakistan requires a breathing space of $5 to $7 billion on immediate basis for keeping its foreign currency reserves afloat otherwise the rapidly depleting reserves could deepen the crisis in months ahead. With depreciation of rupee against dollar twice in last four months, Pakistan’s public debt has jumped up by at least Rs830 billion in the wake of fluctuation in the exchange rate so the debt servicing is bound to be increased in the outgoing fiscal year ending on June 30, 2018. “Pakistan’s external debt and liabilities stood at $83 billon on eve of last fiscal year 2016-17 so exchange rate fluctuation from downslide of rupee from Rs105 to Rs116 against US dollar will increase public debt by Rs830 billion in the current fiscal year 2017-18,” official sources confirmed to The News here on Wednesday.

Former Economic Adviser to Finance Ministry and renowned economist Dr Ashfaque H Khan when contacted said that the government was using dillydallying tactics to face the looming crisis which had already hit the economy. “I can foresee crisis looming on the economic front,” he said and reminded that who called us pseudo-intellectual and spin doctors could not be seen anywhere while keeping the economy in lurch. The government, he said, could negotiate new bailout package from the IMF on eve of upcoming spring meeting of IMF/WB in Washington DC by next month but the Fund would not sign any loan agreement with the outgoing regime leaving office in next two months.

“It was pre-requisite to allow downslide in exchange rate and it was prior step aimed at taking as confidence building measures to approach the IMF because there is no other option but the Fund will not ink any agreement with the outgoing regime,” he added.

Now the government was exploring its options to launch amnesty scheme for non-resident Pakistanis to bring back $4 to $5 billion. Whether it becomes successful in achieving the desired objective is yet to see as we need dollar inflows of $6 to $10 billion on immediate basis.