Pakistan's foreign exchange reserves continued to
grow at an unprecedented rate and have reached the level of over $10.32
billion in the first week of April, 2003. Will this growth in building
up the reserves keep up the pace in future also, is the question to
ponder upon for the economic managers.
The State Bank increased its reserves by $35 million
last week alone took its total holding worth $9.129 billion while the
remaining $1.196 billion are with the commercial banks.
It is being anticipated that the foreign exchange
reserves may hit the level of $11 billion by the end of current
financial year which, about to mature.
It is the inflow of home remittances which are said
to be the main contributing factor behind this unprecedented rise in
country's foreign exchange reserves. According to an estimate the total
amount of receipts from home remittances is going to hit the mark of $4
billion this fiscal year.
Some quarters in the financial sector are of the
opinion that the current pace of the inflow from non-resident Pakistanis
may not sustain on longer terms hence the abnormal growth in foreign
exchange may decline. However, it one side of the picture, the others
are of the view that the real cause behind growth in home remittances
was the strength of rupee against dollar reflected in the exchange
rates, which declined from Rs68 a dollar to the level of Rs58. Besides
the economics which attracted the home remittances through banking
channels, the factor of patriotism also worked forcing non-resident
workers to shift from dollar to rupee.
Another section of the financial experts feel that
element of money laundering was also instrumental behind growth in home
remittances. Flight of capital from Pakistan was a common saying in the
past due to uncertain political conditions shattering the confidence of
the people, especially following the decision of freezing the foreign
currency accounts in 1998.
CHECK ON MONEY LAUNDERING
As far as the money laundering was concerned, the
State Bank of Pakistan has, however, taken note and issued guidelines
for banks to prevent use of the banking sector for money laundering,
terrorist financing, transfer of illegal or ill-gotten money and as a
conduit for while collar crime.
Under the new guidelines, the banks would require to
make all efforts to determine the true identity of every prospective
customer. Some of the requirements to check the ill-gotten money include
attested copies of national identity card or passport of the individual.
In case the NIC does not contain a photograph, the bank should also any,
other document such as driving license etc, that contains a photograph.
In case of a salaried person, attested copy of the service card, or any
other acceptable evidence of service, including, but not limited to a
certificate from the employer. In case of illiterate person, a passport
size photograph of the new account holder besides taking his right and
left thumb impression on the specimen signature card.
Apart from tight fiscal policies at home, the
successful rescheduling of foreign debt amounting to $38 billion was the
major factor giving relief to the government in building up the foreign
exchange reserves. The debt servicing was the main eroding factor and
never allowed the economic manager to take sigh of relief in the past.
As a result of rescheduling, the economy got a breathing space after
rescheduling of $15.5 billion Paris Club loans and almost the similar
amount Pakistan owed to World Bank and the IMF was also rescheduled. The
national economy also got relief in the form of write offs of the loans
from individual countries. In this respective, the United States has
waived $1 billion out the total loans of $2.9 billion.
The waivers, write offs and rescheduling help
providing relief to the economy. As a result of this development, the
debt servicing is expected to come down from 75 per cent to 25-30 per
cent of the foreign exchange earnings. This would certainly provide the
country with a much needed fiscal space to allocate more money for the
development projects, particularly in the fields of health, education
and poverty alleviation programs.
The economic activity in the undocumented sector has
been adversely affected due to tight fiscal measures within the country.
It is a hard reality that cottage industries which are mostly out of the
domain of documented economy generate employment opportunities much more
than the organized sectors in the documented economy. Consequently, the
unemployment rate increased rapidly over the years and doubled in last
The volunteer separation schemes introduced in
various public sector organizations and the financial sector also added
to the problem of unemployment which is said to be the main reasons
behind increasing the crime rate in the country.
There is an immediate need for launching development
projects which on one hand help improving the living standards while
create job opportunities on the other hand. Now the time has come that
the benefits of the growing economy should reach to common man also.