Pakistani Dollar Reserves Rising Again
By Riaz Haq
CA
There is light at the end of the tunnel, and it is not an oncoming train.
Pakistan's dollar reserves are climbing again and its currency stabilizing, after more than a year of monthly declines. The nation's foreign exchange reserves rose by $260 million to $10.21 billion in the week that ended on January 24, according to the State Bank of Pakistan.
This included $500 million Pakistan received from China to help build foreign reserves, said Syed Wasimuddin, chief spokesman for the Pakistan's central bank.
Pakistan's foreign reserves hit a record high of $16.5 billion in October 2007 but fell to $6.6 billion in November, largely because of a soaring import bill. There has been a dramatic decline in the cost of imports such as oil, during the last few months, spelling relief for Pakistan and other non-OPEC developing nations. The price of oil has dropped to about a quarter of what it was last summer.
Pakistan signed a $7.6 billion loan agreement with the International Monetary Fund in November to stave off a balance of payments crisis. It received its first tranche of $3.1 billion that month. In its first assessment since November, IMF has expressed satisfaction with Pakistan's progress. "Initial developments under the program have been positive," IMF spokesman David Hawley told a regular news briefing, according to Dawn. "The foreign exchange rate has appreciated somewhat and preliminary information suggests that end-December targets for net international reserves and net domestic assets at the State Bank of Pakistan were met," he added.
Pakistan's economy deteriorated sharply over the course of 2008 as inflation surged and the current account deficits jumped on the back of rising oil and food prices, according to a World Bank report.
The report titled 'Global Economic Prospects 2009' says political turmoil and ongoing security concerns have also taken a toll on Pakistan's economy, while the global financial crisis added substantial downward pressures on its financial markets.
The general deterioration in regional trade balances has been offset by large remittance inflows, which represent a sizable, and generally increasing share of GDP: during 2007, 14 per cent in Nepal, 8 per cent in Bangladesh and Sri Lanka, 4 per cent in Pakistan, and 3 per cent in India.
Given strong underlying growth dynamics in South Asia, the negative feedback effects of the global financial crisis are expected to be temporary. A relatively rapid rebound is expected in 2010, with a projected revival of GDP growth to 7.2 per cent.
"Investing in Pakistan is investing in future," Prime Minister Gilani recently told leading businessmen in Davos, Switzerland, on the sidelines of the World Economic Forum. Gilani said Pakistan's sound fundamentals offered the investors an opportunity to explore the country's economic potential in diverse fields. He emphasized the need for more foreign investment coming into Pakistan and benefit from its investor-friendly economic policies. He said Pakistan's liberal economic regime with zero import duty on raw material provided equal opportunities for the local and foreign businessmen. He remarked that Pakistan was confronting a number of challenges including economic crisis, however the democratic government was determined to improve the situation.
"Despite all the challenges, economy continues to be buoyant and vibrant in Pakistan," the Prime Minister said, adding the country's mineral and work-force resources had a great potential to be fully tapped.
