view of the rising remittances from Pakistani expatriates, the foreign
exchange reserves are expected to exceed 10 billion dollars a seemingly
ambitious target for the current fiscal year. This target included
remittances of $3 billion, which is now expected to exceed $4 billion as
during the first six month of the current year (July-December 2002) it
has exceeded $2.1 billion. The forex may exceeds $11 billion by June 30.
view of this encouraging indication, the government has asked the State
Bank of Pakistan (SBP) to work on the possibility of retiring expensive
debt ahead of schedule after the country's foreign exchange reserves
exceed US $10 billion.
proposal being considered is that Pakistan should invest about 10 per
cent of its foreign exchange reserves through international investment
expensive debt before schedule has been discussed and the SBP has been
asked to work out the details in this regard. Such debts would be
retired form the exchange reserves available with the government in
excess of $10 billion, an official source told this correspondent. He
said Pakistan had got a breather in terms of debt rescheduling by the
Paris Club under which it bilateral debt worth $12.6 billion was being
re-profiled, which will translate into a monetary benefit of
approximately $3 billion over the years of the agreed timeframe under
the Paris Club agreements.
Pakistan's foreign exchange reserves at $9.4 billion as of today, and
with expectations that the figure will cross the $11 billion mark by
June this year, the government would go for retiring the expensive debts
form the amount in excess of $10 billion," the official said.
asked why was the government waiting for the forex reserves to exceed
$10 billion before retiring loans, the official said,
"Strategically, foreign exchange reserves worth $10 billion are
considered respectable and the government would like to maintain them at
that level". The official also said retiring the expensive debts
with forex reserves at that juncture would no hamper the country's
exports "and the $10 billion mark can also act as a cushion in any
untoward situation, including a possible invasion of Iraq by the United
official said the expensive debts' actual retirement might take some
time "since it would require a lot of effort by the government to
identify the expensive debts and after the SBP completes its findings
the Debt Management Cell of the Finance Division would give its input on
the country's total foreign debt liability is approximately $36 billion,
of which $12.6 billion is the official bilateral debt being re-profiled
under the Paris Club agreement, while Pakistan owes nearly $14.7 billion
in debt to the multilateral agencies," the official said.
there are some expensive private debts, non-guaranteed debts, and some
expensive International Monetary Fund (IMF) loans contracted by Pakistan
under the stand-by arrangement," he said.
country's foreign exchange reserves have risen noticeably during the
last year in the backdrop of Islamabad support for the US-led war on
terror as well as due to foreign remittances from expatriate Pakistanis,
which have started coming in through official banking channels.
Governor State Bank, Dr. Ishrat Hussain disclosed in a public statement
"we are going to hire an international consultant company to advise
us and screen some of the international investment banks", the SBP
governor told Reuters in an interview recently. Pakistan's foreign
exchange reserves rose to a record high of $9.349 billion in the week
ending December 28, of which the central bank's direct holdings were
$7.577 billion, he added. Dr. Hussain said the strong reserves position
had enabled Pakistan to plan the investment move for the first time. The
central bank did not have in-house capacity to manage the reserves, he
is for the time we have surplus," Dr. Hussain said. "The
central bank has to be very cautious and conservative" that it did
not expose itself to any risk.
did not give any deadline for the proposed investments, saying, "We
are working on it".
foreign exchange reserves have soared on the back of aid and grants from
the United States and its Western allies in return for Islamabad's
support for the US-led war in Afghanistan. The Paris Club of donor
countries also rescheduled $12.5 billion of Pakistani's foreign debt,
allowing Islamabad the much-needed breathing space to revive its ailing
from Pakistanis living abroad through official banking channels also
helped the country boost it reserves.
most Pakistanis had sent money through unofficial or private channels.
But the international crackdown on money laundering in the wake of the
September 11, 2001 attacks in the United States forced them to switch.
Pakistan's foreign exchange inflows through banks rose to $2.284 billion
in the first six months of fiscal 2002-2003 July/ June from $789 million
in the same period last year.