Pakistan's Foreign Exchange Reserves

[Owais]

Friday, October 14, 2005

KARACHI: Foreign exchange reserves of the country declined by $79.3 million to $11.922 billion in the week ending October 8, said a statement issued by the State Bank of Pakistan (SBP) Thursday.

During the week, reserves held by the SBP went down by $80.7 million to $9.406 billion this week compared to $9.487 billion a week ago. During the same period, net foreign reserves held by the banks (other than SBP) increased by $1.4 million to $2.516 billion from $2.514 billion. staff report



http://www.dailytimes.com.pk/default.asp?p...-10-2005_pg5_14

 

[EagleEyes]

Pakistan's foreign exchange reserves slip to $11.7b

KARACHI, Oct 22 : The liquid foreign exchange reserves of Pakistan, which, on October 8, 2005, slipped to below $12 billion mark for the first time in the last 13 months since September 2004, continued their downward slide in the following week to stand at $11.7 billion on October 15, 2005, according to latest statistics released by the State Bank of Pakistan (SBP).

It may be recalled that earlier on liquid foreign exchange had reached the coveted $13 billion mark on April 30, 2005 after hovering around $13 billion in April. Over $1 billion loss in reserves since then has been ascribed to the ever-widening trade gap under a liberalised trade regime.

Analysts are of the view that an inflated import bill was necessitated to meet the corporate sector's restructuring requirements by acquiring the latest and state-of-the-art machinery from abroad especially to modernise the textile sector - the life - line of the country's export sector.

The unprecedented rise in international petroleum prices in the last six months or so were also responsible for the sharp depletion of forex reserves especially with the SBP, which continued financing directly the entire oil import bills, they added.

The forex reserves may bounce back to the $12 billion mark in the coming weeks as more earthquake assistance is credited with the State Bank, and the country starts receiving enhanced expatriate remittances to finance their quake-hit relatives.

 

[Srirangan]

Musharraf said Pak need $5b for earthquake relief. Reserves kiss din kaam aenge? Use them.

 

[coldfire2005]

Message deleted.

Reason below.

 

[EagleEyes]

Originally posted by Srirangan@Oct 23 2005, 09:26 AM
Musharraf said Pak need $5b for earthquake relief. Reserves kiss din kaam aenge? Use them.

[post=1154]Quoted post[/post]​

When the money is coming let it come.

Ain't i right? Or you have a different opinion about this?

I have heard indians calling us that in the earth quake days, "hum Pakistanis loag bheek mangraha hain?" Is that what every indian thinks or is it a different class more childish and anti...?

 

[sigatoka]

Using Reserves for domestic infrastructure projects sounds intuitive, elegant and without apparent drawbacks. Even though it goes against Orthodox economic policy you are not the first to suggest it. The Howard educated Economist, Manhoman Singh proposed using India's foreign exchange reserves to upgrade the pathetic state of India's export infrastruture (Roads from farms and Factories to Airports and Ports, The airports and Ports themselves and Electricity and Communication)

Why did Manhoman Singh propose such a thing?? It comes to a suprisingly simple fact, one must believe that a country is holding excess reserves in the first place. For e.g. if you had ten million dollars and had the choice between factories giving 20% return and a bank giving 5% return we would invest 9.5m in Factories and 0.5m keep in the bank for our day to day livings and unforseen circumstances. If you wish to utilise Foreign reserves you must argue that the nation is holding on to too much of it and hence surfering large opportunity cost.

Remember a low foreign reserves add to the cost of transactions between Pakistan coz trading partners are not sure thell get paid. its like we keep only one dollar in the bank and hope to purchase all our groceries on credit. We might have to pay penalties for the high risk that the grocer takes.

Secondly on matters of insurance. Sometimes things happen like a banking crisis. I wonder if any of you remember the Asian financial crisis around 1997. Having low reserves to start with can make a bad situation worse. It can mean that the nation suffers such a financial constipation that imports cant be paid for.

 

[masijames]

Pakistan's foreign exchange reserves down by $40.1 million

KARACHI (December 25, 2007): Liquid foreign exchange reserves have further declined by 40.1 million dollars during the week ended on December 15. Latest statistics, issued by the State Bank of Pakistan (SBP), shows that total liquid foreign during the last week stood at 15.5824 billion dollars as compared to 15.6225 billion dollars a week earlier.

 

[mujahideen]

Well I guess the main factor behind this is the emergency. Because of the emergency many investors pulled their money out of Pakistan. Because investors were pulling out their money the government was forced to take money out of its reserve.

 

[masijames]

actually this really happend when the emergency started companies from North America and Europe they pulled atleast 100 million dollars

 

[fatman17]

Forex reserves erode by $3.1b in 5 months

JAVED MAHMOOD
KARACHI - The foreign exchange reserves of Pakistan have seen a record erosion of 3.10 billion dollars in just five months of the current financial year, reflecting the gravity of deterioration in the key fundamentals of the national economy of the country.
State Bank of Pakistan has reported 13.27 billion dollars worth total foreign exchange reserves by March 29, 2008, which indicate a huge plunge of 3.10 billion dollars when matched with the record high 16.37 billion dollars reserves on November 2, 2007, The Nation learnt on Thursday.
At present the foreign exchange reserves with the central bank stood at 11.099 billion dollars (by March 29, 2008) from 14.166 billion dollars on November 2, 2008, indicating a decline of 3.067 billion dollars during the period under review.
Meanwhile, the reserves with the domestic banks slightly dropped to 2.175 billion dollars by March 29, 2008, from 2.206 billion dollars on November 2, 2007.
Financial sector analysts said that the current account deficit, triggered by the trade deficit, has accelerated the outflow of the foreign exchange greater than the inflow of the foreign currency in the shape of remittances, foreign investment and external economic assistance/loans, etc.
In seven months of the current fiscal Pakistan has sustained 7.51 billion dollars worth current account deficit against 5.10 billion dollars such deficit in the corresponding period of last fiscal. In FY07 the current account deficit ended at 6.878 billion dollars as against 4.99 billion dollars in FY07.
The trade deficit from July-February had enlarged to 12.433 billion dollars, from 8.942 billion dollars in the corresponding period of last fiscal. It shows an increase of 3.491 billion dollars in the quantum of the trade deficit in eight months of FY08.
The Nation learnt that the high international oil prices (fuel/edible oil) and sharp increase in the imports of different groups have consumed a big chunk of additional amount of foreign exchange, causing extra burden on the national reserves.
For example, the imports have increased to 24.141 billion dollars during July-February FY08 while exports amounted to only 11.707 billion dollars during this period.
Sector-wise imports indicate that the petroleum, transport, machinery, textile, agriculture/chemicals and metal groups have caused additional burden on the overall import bill.
Analysts pointed out that the previous governments could neither float international bonds nor off-load the global depository shares in the global markets due to political anarchy in the country as a result the current account deficit has triggered to a record high level, eroding a big amount of foreign exchange reserves.
The analysts are of the opinion that the newly-appointed government may not be able to raise foreign exchange from the international markets in the shape of bonds and GDSs by June this year and this exercise might be undertaken after the announcement of the new budget.
They claimed that the worst economic performance of the country in this fiscal would discredit the previous regime, led by President Pervez Musharraf and the new government would strive to improve the economic position in the coming financial year.

 

[maqsad]

Where are all the fans of Shopper Aziz now?

For the last 8 years he took so many state OWNED enterprises and sold them off to "private investors" i.e. foreigners and with each asset of the country that he sold off the investors it added to the loss of foreign exchange as the investors sucked their yearly profits out of pakistan. Aziz also allows foreign companies to set up cellphone and land line companies in pakistan which suck away billions each year in foreign exchange. In his entire eight years this guy made no effort to force the companies to set up manufacturing or even assembly plants in pakistan.

Also I am wondering, how on earth can he run such a disaster for 8 years and end up with a forex reserve surplus? When you think about it in simple terms, if a country has a negative trade surplus every single year then how on earth can its forex reserves build up from next to zero to $16 billion? I don't know the answer for sure but maybe that $16 billion come as part of the $65 billion that poured into pakistan after 2001 when many expats were coming back.

So who is really responsible for that $16 billion to begin with? Is it some ingenious export-oriented economic plan created by Aziz, or is it the side effect of economic refugees bringing their dollars, pounds and euros into pakistan after 2001? Or did Shopper Aziz buy eurobonds(which have to be paid back by pakistan) in order to artifically inflate the forex surplus to make the economy look good?

And now as the bubble bursts, the blame will go on the civilian govt which is inheriting the disaster.

 

[mujahideen]

^^^^Well the civilian government can stop the bleeding, you know, its not like they cant. The fact is Shukat Aziz-s policies will be continued, these politicians can say what they want, in the end they will follow in Aziz's footsteps.
One of the reason's why our foreign reserves are going down is because Aziz, has left. Foreign investors trusted him, his words and now that he is gone their is no one that the investors can trust so we get nothing.

 

[maqsad]

The foreign exchange reserves are going down because of a trade deficit, not because Shopper Aziz has taken a vacation. Also, nobody has ripped off the pakistani people and sold any state assets off recently(to foreigners) or handed over local franchises to foreigners mainly because they have run out of things in pakistan to loot and steal and sell and rent. Everything is used up.

I still don't understand where all that foreign exchange came from in the first place. Everyone is always talking proudly of the $16 billion that came out of nowhere but I want to ask people where did it come from? Who created it? Who did it belong to? For years I have heard so much praise about this $16 billion but nobody ever explained where it appeared from!

 

[AgNoStiC MuSliM]

Its too early to blame SA.

Remember that we have just gotten a new democratic coalition government, that carries with it the baggage of the failures of the past elected governments.

We have suffered from the worst year ever in terms of terrorism and insecurity, and no one knows what route the new government in going to take, and what the impact of that choice will be on the country.

We do not know whether the new govt. is going to choose to go on a "Musharraf witch hunt" thereby increasing uncertainty and deflecting attention away form governance and other more pressing issues.

These are uncharted waters for Pakistan, and in the absence of a "strong man" who ensures continuity of policy, there will be capital flight until faith in the Pakistani political process and its policies is established.

Blaming SA is the easy way out, the problems are deeper and cannot be resolved except over time.

 

[roadrunner]

Where are all the fans of Shopper Aziz now?

I think "Shopper Aziz" has done a very good job over the last 8 years

For the last 8 years he took so many state OWNED enterprises and sold them off to "private investors" i.e. foreigners and with each asset of the country that he sold off the investors it added to the loss of foreign exchange as the investors sucked their yearly profits out of pakistan.

Quite false and ignorant. Privatizing all this stuff added to the FOREX reserves held within Pakistan through substantial investment levels never seen before in Pakistan's history. The profits from these investment, whether they state owned or owned by overseas consortiums, would not have made any difference to the FOREX reserves since the revenue was generated in Pakistan itself.

Aziz also allows foreign companies to set up cellphone and land line companies in pakistan which suck away billions each year in foreign exchange. In his entire eight years this guy made no effort to force the companies to set up manufacturing or even assembly plants in pakistan.

Maqsad, at least don't post all out lies, or if you aren't sure of the facts, check them before you post. The industrial base of Pakistan has grown since he's come to control the economy, and the services sector has grown. Here is one article, for example showing the extent of industrial growth

Pakistan’s Industrial growth increases by 130%
via Pakistan Times - Pakistan's First Independent Daily E-Newspaper - www.PakistanTimes.net - Loading...
The annual growth of the manufacturing and industrial sector has significantly increased by 130 % during 2003-04 against the target of 7 % fixed for the last fiscal.Pakistan’s Industrial growth increases by 130% - PakPositive

Also I am wondering, how on earth can he run such a disaster for 8 years and end up with a forex reserve surplus? When you think about it in simple terms, if a country has a negative trade surplus every single year then how on earth can its forex reserves build up from next to zero to $16 billion? I don't know the answer for sure but maybe that $16 billion come as part of the $65 billion that poured into pakistan after 2001 when many expats were coming back.

Again, you don't know what FOREX reserves are. Your statements here are wrong.

So who is really responsible for that $16 billion to begin with? Is it some ingenious export-oriented economic plan created by Aziz, or is it the side effect of economic refugees bringing their dollars, pounds and euros into pakistan after 2001? Or did Shopper Aziz buy eurobonds(which have to be paid back by pakistan) in order to artifically inflate the forex surplus to make the economy look good?

And now as the bubble bursts, the blame will go on the civilian govt which is inheriting the disaster.

This erosion of FOREX has only happened in the last months. Aziz has been in power for 8 whole years. It is not coincidence that the economy (and the FOREX is a big indicator of things to come) has started taking a turn for the worse. You'll see very slow growth from now on, as PPP and NS take control of the treasury. This has nothing to do with the previous 8 years that were governed well, and everything to do with 1) "Islamists" causing instability and 2) Corruption/bad governance of PPP/NS. Back to the 90's for Pakistan.