Of the total, reserves held by the central bank hit $13.26 billion, recording an increase of $110 million and those held by scheduled banks went up from $3.82 billion to $3.84 billion.
“The rise is due to an increase in remittances from overseas Pakistanis and a narrowing trade deficit,” highlighted SBP spokesperson Syed Wasimuddin. “In September, the country received $922 million in the form of remittances while in August the same stood over $933 million,” he added.
Meanwhile, analysts assert that the standby agreement between the government and the International Monetary Fund (IMF) has no small contribution in helping the country’s reserves reach historic highs.
“The issue with the IMF funds is that the government cannot use them to control fiscal imbalances or to support the rupee in foreign exchange markets,” pointed out Hammad Aslam, head of equity at BMA Capital.
Nonetheless, he said that remittances have shown encouraging signs in recent months. “Overseas Pakistanis are increasingly shifting their mode of money transfer to regulated channels,” said Aslam. “Although we may see some decrease in the level of remittances in coming months, on a yearly basis there will likely be an increase of about 20 per cent in remittances due to this shift,” he added.
Aslam highlighted that the temporary slowdown in import of oil had helped narrow the current account deficit for the current fiscal year.
“The balance of payments is expected to stay on the positive side till the end of the current fiscal year,” said the analyst. “However, from next the country will have to start making repayments on loans from the Paris Club and the IMF which will put pressure on reserves.”
Published in The Express Tribune, October 22nd, 2010.
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