Plan afoot to manage external account requirements

ISLAMABAD: In the last ditch effort to avoid approaching of the IMF for another bailout package, Pakistan has placed short term plan for managing external account requirements and claimed that the foreign currency reserves held by the State Bank of Pakistan (SBP) would go up by $600 million within four months period till June 30, 2018.

The foreign currency reserves of SBP had slashed down to below $12 billion and touched $11.944 billion on week ending on March 16, 2018 as the reserves decreased by $182 million just in this week. Now the economic managers are claiming that they have placed a strategy for halting decrease of reserves but it will help increasing reserves by touching $12.5 billion mark by June this year.

“Pakistan has made request to friendly countries for providing us few billion dollars but this amount will be required for meeting requirements of upcoming budget in fiscal year 2018-19 because we have managed our requirements for four months (March-June) period of the current fiscal year 2017-18,” Adviser to Prime Minister on Finance Miftah Ismail confirmed to The News when asked him in this regard on Saturday.

During the week ending 16 March, 2018, SBP’s reserves decreased by $182 million to $11,944 million, due to payments on account of external debt servicing.

To a query about gross financing requirements of $10 billion in remaining months of the current fiscal year, he said that they had managed all requirements and streamlined inflows in months to come. “We will not have any problem on external accounts as our foreign reserves held by the SBP will go up by $600 million in next four months,” he added. He said that the debt servicing requirements stood at $2.5 billion for the remaining period of the current fiscal year. “We have made arrangement to meet all requirements and even our reserves will be increased,” he said and added that Pakistan did not require breathing space from friendly countries on immediate basis but they were in discussions with few of them to manage financing for next budget 2018-19.

However, the sources said that Pakistan would have to rely upon traditional inflows from the multilateral creditors in shape of project loans, rampant borrowings from commercial banks and taping of Eurobond. The taping of Eurobond is still an option but it will be decided keeping in view mark up rate on Pakistan’s paper in bond market.

According to the sources, the latest IMF report on post programme monitoring (PPM) has caused alarm bells among the dwellers of Q Block (Finance Ministry) in which the Fund disclosed that the Net International Reserves (NIR) had nosedived to negative $724 million in mid February 2018 against $7.5 billion NIR when the Extended Fund Facility (EFF) programme of the IMF ended in September 2016.

Within one and half year period, all NIR built up by the government evaporated into the air and put the country again into mode of economic instability.

The current account deficit had touched $12.4 billion in last fiscal year in the wake of widening trade deficit. The CAD had already peaked to $10.82 billion in first eight months (July-Feb) period of the current fiscal year and official estimates suggest that it might touch $16 billion mark till June 2018.