KARACHI: For the first time, country’s foreign exchange reserves crossed the figure of $17 billion to set a new record, the State Bank reported on Thursday.
Remittances sent by overseas Pakistanis and narrow current account deficit were the key reasons of record build up of reserves.
Just two years back the country was about to default on foreign payments and it hurried to sign an emergency loan agreement with the IMF to avoid default. The agreement of $11.3 billion, of which over $7 billion have already landed into country’s reserves, boosted confidence and saved the country from another possible crisis.
The State Bank said the foreign exchange reserves of the country by Oct 15, 2010, were $17.101 billion. Out of this total, the State Bank’s reserves rose to record $13.264 billion while that of commercial banks’ rose to $3.837 billion.
The remittances, which helped reserves to rise to this level, were another record as the first quarter of the current fiscal year noted an all time high inflow of $$ 2.646 billion.
Remittances are now country’s most reliable source of foreign exchange while these have occupied the place of second largest source of dollars after exports.
During the last fiscal year, remittances were 47 per cent of the total exports of the country, reflecting importance of overseas Pakistanis.
The State Bank, ministry of overseas Pakistanis and ministry of finance jointly made effort to ease up the process of remittances into the country which certainly produced positive results in the form of higher remittances.
The State Bank said the current account deficit was another reason for record build up of reserves. The Central Bank reported a couple of days before that the current account was surplus by $447 million in September which slashed sharply the rising deficits in the months of July and August.
At the same time, the first quarter current account deficit fell against the same period of last year.
The SBP reported the July-September deficit at $545 million compared to $587 million deficit of the first quarter of the previous year.
The narrow deficit was also because of foreign aid to help the flood affected Pakistanis, and a big amount of IMF ($451 million) was the real reason of current account surplus.
The high reserves made a positive impact on the exchange market. Both the inter-bank as well as open market find it easy to trade dollar at normal rates and normal demand.
The exchange rate is stable for more than a month and inter-bank currency dealers said the exchange rate went higher only when some big payments were made in July and partially in August.
Anwar Jamal, an open market currency dealer, said the rupee-dollar parity is stable while demand is sluggish.
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