Pakistan’s foreign reserves have shown a significant decline of about 11 per cent dropping to lowest level of current fiscal year, 14.55 billion dollars, after the imposition of state of emergency, which is another setback for the economy.
After the imposition of the state of emergency on November 3 by the then chief of army staff and incumbent president Gen (Retd) Pervez Musharaf, major outflows from the Special Convertible Rupee Account (SCRA) were witnessed.
Although, emergency was lifted in mid December 2007, its negative impacts are still seen on the country's economy. Decline in the foreign inflows, huge external payments and rising current account deficit are the main reasons behind the tremendous decline in foreign reserves.
The State Bank of Pakistan (SBP)’s statistics show that overall foreign reserves have registered some 11 per cent decline after the imposition of state of emergency during the period of November 3, 2007 to February 9, 2008.
Likewise, SBP reserves have declined by 13 per cent during the November- January period of current fiscal year. In the second week of February, SBP reserves stood at 12.3183 billion dollars, declining from 14,166.1 billion dollars in the first week of November, 2007, and showing a drop of 1.8478 billion dollars during the last three months.
The foreign reserves level of 14.55 billion dollars is the lowest in the current fiscal as it stood at 15.6137 billion dollars on the beginning of current fiscal year 2007-08. High oil import bill and slow privatization processes are putting a negative impact on the foreign reserves, which have shrunk nearly two billion dollars after the imposition of emergency.
Owing to rising oil prices in the world market as well as imports, Pakistan is compelled to spend huge foreign exchange for oil payments, economists say. However, declining foreign liquid reserves are another threat to the country's economy, which is already facing different challenges including increasing trade and current account deficit, inflation and slow down in the exports and privatization.
The country's foreign reserves have been consistently declining and the State Bank of Pakistan (SBP) statistics show that foreign reserves have further plunged by some 296.4 million dollars during the last week.
The major decline in the foreign reserves has been observed during November, December and in January, which shows a monthly average decline of some 600 million dollars during the last three months.
Economist said declining reserves posed a severe setback to the economy, and if new privatization transactions were not done in the near future, things would get even worse. Post-emergency outflows from the SCRA account and high payments of oil are the main reasons behind this decline, they added.
Country's foreign reserves have declined from over 14.7779 billion dollars to 14,550.7 billion dollars during the week ending on February 9, 2008. In addition, reserves held by banks also show a decline of 16.2 million dollars from 2.2324 billion dollars to 2.2486 billions dollar during the week ending on February 9, 2008.
It is expected that the huge declined in the foreign reserves would compel the government to further borrow from the international agencies, which could also increase the overall foreign debt.