High import bill of oil and slow privatisation processes is putting negative impact on the country's foreign exchange reserves, which have shrunk by $296.4 million in the last week and some $1.59 billion during the last three months.
"The surging oil prices in the world market, besides rising import bill of Pakistan, have compelled to spend huge foreign exchange for the oil payments," an economist said. The declining foreign exchange reserves is another threat to country's economy, which is already facing various challenges including increasing trade and current account deficits, inflation and a slow-downed exports and privatisation process, he added.
The country's foreign exchange reserves have been declining consistently and State Bank of Pakistan's (SBP) statistics show that country's foreign reserves have further plunged by some $296.4 million during the last week. Country's foreign exchange reserves have declined from the level of over $15.074 billion to $14.7779 billion during the week ended on February 2, 2008.
The level of $14.77 billion is the lowest level of current fiscal as it was stood at 15.6137 billion dollar on the beginning of current fiscal year, 2007-08. During the last week foreign exchange reserves held by SBP have declined by $285.8 million to 12.5293 billion dollar during a week. Moreover, reserves held by banks also show a decline of $106 million to $2.2486 million during the week ended on February 2, 2008.
The major decline in the foreign exchange reserves has witnessed after the imposition of state of emergency in the country, which shows an average decline of some $0.53 billion monthly during the last three months. During the last 12 weeks, overall foreign exchange reserves have shrunk by some 10 percent or $1.59 billion to $14.7779 billion from $16.3725 billion.
A major decline has been witnessed in the SBP-held reserves, which dipped by 11.5 percent or $1.636 billion to $12.5293 billion after the imposition of emergency rule in the country. On November 3, 2008, the reserves were stood at $14.1661 billion.
While, the reserves held by the banks have up by $422 million to $2.2486 million during the week ended on February 2, 2008 as compared to $2.2064 billion in first week of November.
Economists are terming the declining exchange reserves as another setback for the economy, apprehending that the reserve would further dip if new privatisation transaction are not done in the near future. The post-emergency outflows from the SCRA account and high payments on account of oil import bills are the main reasons behind this decline, they added.
It may be mentioned here that at the end of the last fiscal year, 2006-07, country's foreign exchange reserves witnessed an increase of around 19 percent to 15.6137 billion dollar's benchmark as compared to 13.1369 billion dollar during fiscal year of 2005-06.