Declining foreign exchange reserves pose serious challenges for economy-ICCI

  • July 19, 2013
Islamabad Chamber of Commerce & Industry has warned that Pakistan’s foreign exchange reserves have now fallen to below adequate levels and government should take urgent measures to arrest this dangerous trend as it will create serious problems for the economy.
Zafar Bakhtawari, President ICCI said that Pakistan’s foreign exchange reserves, which were US$ 18 billion in July 2011, have now come down to $10.501 billion, due to which the economy stands exposed to serious challenges. He said government and State Bank of Pakistan should pay serious attention to this problem for remedial measures. He said Pakistan needs more foreign exchange to fulfill the foreign debt obligations as in FY 14, Pakistan has to repay an amount of $5.8billion to foreign lenders, but the current situation depicts a weak health of economy and loss of confidence on Pakistan’s ability to repay its debt obligations. He urged that government should undertake immediate structural reforms to bring stability in foreign reserves.
Zafar Bakhtawari was of the view the due to falling foreign reserves government would miss all its economic targets as inflation will return to double digit, economic growth will slow down, budget deficit will further widen and unemployment would go up. He said obtaining loan of $5.3 billion from the IMF will not relax the pressure on foreign exchange reserves and SBP need to utilize all options to improve the balance of payment issues.
It is the need of the hour that government should support and facilitate the export sector and provide new incentives to overseas Pakistanis for improving the foreign reserves. He said there are over ten million Pakistanis working in foreign countries including USA, UK, Canada, UAE, Saudi Arabia etc. and government should use the huge potential of overseas Pakistanis to augment forex reserves.
He said annual remittances from overseas Pakistanis through official channels have reached about $14 billion and almost an equal amount is being sent home through unofficial channels. Government can divert all foreign remittances to official channels by providing attractive incentives to Overseas Pakistanis, which will help in improving foreign reserves and saving the economy from harmful consequences.
Zafar Bakhtawari also said that import bill is exceeding $15 billion and proposed that measures should be taken to decrease the oil import bill. Most effective tool in this regard is to make Pakistan Railways comfortable, efficient and economical.