Pakistan's actual reserves below 8 billion $

Actual reserves of SBP still below $8 billion

* SBP showing $1.2b deposits of foreign countries
* $500m from PTCL sell-off support the reserves

By Arshad Hussain

KARACHI: Despite the inflows of $4 billion in Pakistan during the last one year, the country’s actual foreign reserves stand below $8 billion this week.

“About three days back, the central bank has received a payment of $500 million against the sell-off of the Pakistan Telecommunication Company Limited (PTCL) supporting the actual reserves to $8 billion,” a top banker said. “Before it, it was below $7.2 billion.”

Since 2000 the central bank has continuously been showing $1.2 billion deposits of Foreign Exchange Liabilities with the Pakistani government in its actual reserves. Sources in the banking sector claimed that such amount was a kind of support for the country, not the actual reserves.

There is another liability of $500 million of euro bonds in the country’s reserves, which have to be paid back. However, another $800 million 10-year and 30-year global bonds would come to the State Bank by the end of April this year.

The country’s total reserves had touched a all-time high at $13 billion in April 2005, but since then, the reserves are declining.

About two years back, the central bank had kept $3.2 billion country’s reserves with Europe, the UAE, the US and other countries to gain profit. “The State Bank is getting two percent profit per annum on such reserves, while the benchmark International LIBOR rates are moving around 5.2 percent per annum.”

“The lack of management is causing an approximate loss of $100 million per annum on the reserves deposited with foreign companies,” an official said.

After the second payments of $500 million against the sell-off of PTCL, the central bank’s reserves stand at $10.239 billion, the official said. The total reserves of the country are at $12.484 billion, while the banks have $2.245 billion. Of the total reserves held by the State Bank, around $1.2 billion are the deposits of foreign countries.

The country, during the last 12 months, has received an amount of $4 billion out of the privatization of the government entities and from international donor agencies.

Bankers claimed that the country’s reserves are declining only because of supporting rupee-dollar parity.

From April 1 2005 up to now, the greenback has appreciated by 71 paisas or 1.19 percent against the local currency. On April 1, 2005, the US currency was at Rs 59.38 for buying and today it stands at Rs 60.09.

The demand for the greenback is rising in the interbank market because of the rising trade gap to $7.4 billion in eight months, which was at $3 billion in the last full fiscal. The government in the last budget had given a target of above $21.79 billion while $17 billion for exports.

Market experts said the exports of the country would touch an all-time high this year to $18 billion and imports would be at $23 billion. Treasury officials claimed that the central bank is already short of $400 million to $500 million because of the forward buying. It is paying $350 million to $400 million against the oil import bills of the oil marketing companies.

“These huge payments for crude oil have disturbed the country’s reserves,” a banker said.

He said the reserves would further increase as the remaining payment of $1.2 billion for the PTCL sell-off has yet to come, while the country is still receiving donations for earthquake reconstruction activities. In the first quarter of 2004, the federal government had paid off above $1 billion of the International Monetary Fund (IMF) to rid of its expensive loans.