As loans fail to materialise, possibility of default rises. Actual useable Foreign reserves down to

AsifAmeer

Siasat.pk - Blogger
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http://tribune.com.pk/story/526825/...-to-materialise-possibility-of-default-rises/

Pakistan has so far secured loans worth only $1.6 billion during the eight months of the ongoing fiscal year, which has led to a $1 billion shortfall in meeting balance of payments requirements. This shortfall is now likely to be met using the nations already strained foreign exchange reserves.

According to officials of the Economic Affairs Division (EAD), [HI]the country received roughly $1.6 billion in foreign loans during the first eight months (July-February) of the current fiscal year, which is just 48.8% of the budgeted estimate of $3.3 billion for the year. This estimate was exclusive of budgetary support assistance.[/HI]

[HI]Foreign loans are budgeted as a part of the governments overall projections for the balance of payments[/HI], and any shortfall has a direct bearing on foreign currency reserves held by the State Bank of Pakistan (SBP).

At the time the budget was formulated for the current fiscal year, policymakers had estimated that net reserves held by the SBP would recede to $8.1 billion by June 2013. However, the revised estimates provided by the finance ministry have painted an even more alarming picture: according to the Budget Strategy Paper for the upcoming year, which the outgoing cabinet approved this month, the [HI]SBPs reserves are expected to deplete to $6.8 billion by the end of June 2013[/HI]. That amount is enough to finance Pakistans import bill for only 50 days.

Furthermore, [HI]that amount is inclusive of forward contracts signed by the SBP. SBP Governor Yaseen Anwar has refused to disclose the exact amount committed by the central bank, but the worth of these contracts is estimated in the range of $2 billion to $2.5 billion. And though they are counted in the total reserves, the central bank cannot use money pledged in forward contracts[/HI]. Therefore, [HI]actual usable net reserves with the SBP will range between $4.3 billion to $4.8 billion[/HI] by the close of this fiscal year. That amount is sufficient only to finance slightly over a months worth of import bills.

Yet Pakistan shows no signs of going for a pre-emptive bailout package deal with the International Monetary Fund (IMF). According to the minutes of the last of the Monetary and Fiscal Policies Coordination Board, the SBP governor had opposed the need to enter into a fresh IMF-funded programme.

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The international lending agency had already withheld budgetary support under an earlier programme due to the PPP-led regimes failure in implementing fiscal and energy sector reforms.

Pointing fingers
Meanwhile, instead of taking corrective measures to avoid a looming default on international payments, responsible state institutions have found it more convenient to indulge in the blame game.

EAD officials have held the Planning Commission (PC) responsible for the shrinking inflows of money. They argue that the PC has become virtually dysfunctional over the years, and has failed to follow-up on required actions with the National Highway Authority and the National Transmission and Despatch Company, the two largest recipients of foreign loans.

They say that international lenders like the Asian Development Bank and the World Bank have cancelled many loan facilities available to Pakistan due to the slow progress on projects for which loans were obtained. They also say that they fear that many more facilities could be withdrawn in the months to come.

On the other hand, the PC too is sceptical about the role of the EAD. PC officials say that the EAD is signing on for new loans without considering whether these loans are required or not.

Taking loans for [meeting] balance of payments [requirements] is not a good idea, PC Deputy Chairman Dr Nadeemul Haque said. He says the solution lies in accelerating growth, which will enhance revenues and consequently reduce reliance on loans for development purposes.

Officials also added that concerned government agencies were not following laid down procedures and trying to do meddle in each others jobs resultantly, nothing was getting done.

In another telling sign of its performance over the years, the outgoing government also failed to attract foreign investment a major inflow for the exchequer which plunged below $1 billion for the first time in decades. When the PPP-led coalition government assumed power, foreign direct investment had clocked in over $5.5 billion.

Published in The Express Tribune, March 27[SUP]th[/SUP], 2013.


Comments: Money grows on trees.. And thats how u grow it..
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kapeesh?
 

Unicorn

Banned
Asif, according to this 48.8 percent of the budget so far is financed through loans or the other way around ????:13:
 

miafridi

Prime Minister (20k+ posts)
Please sum up the situation in one or two lines. As most of us(non economic people) just want to see the moral of the whole story.
 

zhohaq

Minister (2k+ posts)
We are good till a month or two after the election, so PPP and its Democracy is safe....

Jeay Bhutto...:P
 

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