Some analysts and economic experts are raising the question that why the PTI government and Prime Minister Imran Khan is panicking on foreign reserves and financial health of the country. The answer is because foreign reserves are falling at fast pace and external pressures are increasing. The official foreign reserves of Pakistan stand at $7.77 billion. This is the lowest level of foreign reserves in last five years.
The reserves of commercial banks stood at $6.407 billion as against $6.470 billion a week earlier, according to the SBP. The country’s total foreign exchange reserves decreased 0.7 percent or $111.3 million to $14.184 billion. They stood at $14.295 billion in the previous week. These reserves can only cover the imports for two months.
To stablise the fast depleting foreign reserves, the PTI government succeeded to arrange $3 billion from Saudi Arabia to keep in the reserves for a year. Prime minister Imran khan is hopeful to get some relieve from Chinese government to further stablise the reserves, as the result of his visit to China.
The State Bank of Pakistan (SBP) said its foreign exchange reserves declined $48 million as of 26 October from $7.825 billion a week earlier. The SBP’s forex reserves were teetering around six billion dollars by the end of fiscal year of 2012/13, but they recovered to $9.097 billion at the end of financial year.
Last week, Saudi Arab pledged six billion dollars to help Pakistan meet its external account challenges. The package includes three billion dollars in immediate balance of payments support and three billion dollars a year on account of oil deferred payment. Current account deficit widened to $18 billion during the last fiscal year, up 42.5 percent from a year earlier.
The SBP’s reserves declined due to external debt servicing and other official payments. Depleting external account underscored an urgent need of top-ups committed by the Saudi government to avert looming balance of payments crisis.
Pakistan has officially requested the IMF for a loan to ease up its balance of payments crisis. It is not clear yet that how much loan Pakistani government is seeking from IMF. IMF is expected to put forward hard conditions for a possible loan. The IMF delegation is expected to arrive in Pakistan to start formal talks on the loan program.
Almost every government since 1980s went to IMF and World Bank for loans to stablise the financial conditions. The last government of PML-N completed the three years program and got $6.6 billion loan facility. This program ended in 2016 and PML-N government did not go for another loan facility.
Now PTI government decided to enter into a new IMF program. IMF will grant the loan to the government after imposing its conditions. IMF always stress to introduce structural reforms and to privatize the public sector corporations and entities. It will not different this time.
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23 August, 2019