The State Bank of Pakistan (SBP) acquired more than $2 billion from the interbank market during the last seven months to maintain its official foreign exchange reserves and mitigate the effects of decreased foreign loan inflows.
Express Tribune, quoting sources, reported that this strategy helped the SBP meet the International Monetary Fund’s (IMF) requirements for net foreign reserves and forward swaps.Â
Despite these significant market interventions, the exchange rate between the Pakistan rupee and the US dollar remained relatively stable, with the rupee appreciating slightly.
The SBP’s actions have prevented a potential decline in foreign currency reserves below $6 billion and a devaluation of the rupee.
By the end of December, the SBP successfully reduced its forward swap position to $3.42 billion, slightly below the IMF’s target, and met another IMF condition regarding the government’s net reserves.
The IMF’s goal for gross official foreign exchange reserves of $8.2 billion by the end of December was also achieved, with reserves hitting $8.3 billion. Â
Pakistan repaid $3.2 billion in foreign debt and extended $4 billion in loans from Saudi Arabia and China during the first half of the fiscal year, yet its external debt cumulatively rose to $131.2 billion.Â
The country is seeking a rollover of a $2 billion loan from China which is maturing soon, given its inadequate reserves to cover the payment. This request is part of efforts to manage its financial obligations, including an unavoidable $1 billion eurobond payment.
The IMF predicts an exchange rate of Rs300 to a dollar by June, a forecast that may not hold if the SBP continues to buy dollars to support its reserves.
Recent reforms and crackdowns on illegal foreign exchange activities have improved market sentiments and liquidity. Despite these efforts, Pakistan’s foreign exchange reserves provide a limited buffer, covering just over a month of imports.
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All this is cosmetic. Temporary measures. How will rupee dollar parity is stable? You don’t need to be genius to work it out. Reduce trade deficit( increase exports). Consequently balance of payments will improve. Any strategy to boost exports ,other than hiving subsidies to textile sector because Commerce Minister is textile company owner.
Areas to improve are, enhance per acre yield of crops, meat farming, IT sector, human resource training to meet the requirements of ageing countries, reduce budget deficits etc. Make five/ ten years plan. Execution of these plans will be key.
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All the rich in Pakistan are jumping on the real estate bandwagon; creating and making overvalued real estate where eventually the inflated prices’ bubble bursts and in the process making real estate inaccessible to hundreds of thousands of who actually need reasonable accommodation to live in. There are billions and trillions of rupees of dead investments in DHAs, Bahria Towns and countless other societies, if that money was wisely invested in creating manufacturing and service industries, we would have been for sure in a better state than we are now.
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