Morning Briefing for Feb 24, 2012 – Standard Capital

Karachi: Current economic flows round up

According to Standard Capital,

• Forex reserves have fallen;

• IMF loan tranche to be paid today;

• Old sweeteners quite unlikely

State Bank of Pakistan (SBP) reported that Pakistan’s foreign exchange reserves have fallen US$16.64 billion in the week ending Feb. 17 as against US$16.77 billion in the outgoing previous week. Meanwhile, reserves held by SBP have fallen to US$12.21 billion from $12.29 billion a week earlier, while those held by commercial banks also fell to US$4.43 billion, compared with US$4.48 billion in the same period.

How forex reserves falling? loan repayment today…
Foreign exchange reserves hit a record $18.31 billion in July last year, but have since plummeted due to debt repayments. Pakistan is repaying an US$8bn International Monetary Fund (IMF) loan.

The repayment of US$399 million of the IMF loan is liable to be paid today. With poor indicators befalling on real economy due to energy shortage, the sources of additional revenue is scarce and hence forex reserves to be further drained.

Old sweeteners saved the day for Pakistan economics – but not any more
Reserves were boosted in June last year by inflows from Breton Wood multilateral institutions like World Bank (WB) and Asian Development Bank (ADB). For instance, out of the amount received of US$411 million, US$191.9 million loan was from the WB, and a US$196.8 million loan from the ADB. In value terms though, higher exports and a record inflow of remittances have become shouldered foreign exchange reserves. According to data, remittances rose 21.5% to US$7.43 billion in the first seven months of the fiscal year (July‐June), compared with US$6.12 billion in the same period a year earlier.

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