Contrary to the general belief, it is hoarding that is behind the US dollar shortage in Pakistan, says a FBR member who added that taking action against speculators and hoarder of the greenback was a responsibility of regulators and law-enforcement agencies.
“About 90 percent of the dollars are being hoarded in Pakistan while currency smuggling has just a 10 percent share,” said Mukarram Jah Ansari about an assessment carried out by the FBR.
Ansari said the FBR seized dollars and Saudi Riyals in a few instances but hoarding was the real issue and revealed that the government was making efforts for signing the Electronic Data Integration (EDI) agreements with different Central Asian Republics (CARs), Russia and the UAE) to curtail mis-invoicing and under-invoicing.
The media report came as smuggling of dollar to Afghanistan has been a hot topic in the country. Finance Minister Ishaq Dar was first to acknowledge the issue which was later endorsed by the currency market, saying Pakistan was experiencing large-scale outflow of greenback to the neighbouring country after the Taliban’s takeover of Kabul last year.
It had eroded Pakistan’s foreign exchange reserves with the exchange rate going down thanks to smuggling, fake imports of dollars and Islamabad’s negligence towards the issue, said Malik Bostan – who is the chairman of Exchange Companies Association of Pakistan – had told media last month.
One may recall that Dar has repeatedly pointed out this issue but, sadly, the government remains unable to control the illegal movement for whatever reasons there may be.
Bostan said dollar was available for Rs155 and Pakistan’s reserves stood at $22 billion Taliban took over Kabul. “Now the reserves have sunk to their lowest level in about eight years with a dollar selling for Rs225 in the interbank market. This unhindered flow of the American currency towards Afghanistan has created a crisis for Pakistan.”
Around 15 million dollars used to cross each day from Pakistan to Afghanistan since Islamabad had permitted each person to take $1,000 per day while 15,000 people regularly travel to the neighbouring country daily, he said.
Dwindling foreign reserves
Pakistan urgently needs dollar inflow, as the State Bank of Pakistan foreign exchange reserves hit another low of $5.576 billion during the week ended on Dec 30, 2022.
However, Pakistan total foreign exchange reserves during the week stood at $11.4 billion, including $5.8 billion of commercial banks.
During the week, the State Bank of Pakistan (SBP) foreign exchange reserves saw an outflow of $245 million for external debt repayments.
Earlier, the State Bank of Pakistan said the amount currently stood at $5.82 billion as of Dec 23, which the lowest level in eight years after a reduction $294 million during the week.
Pakistan would have to repay approximately $8.3 billion in external debt over the Jan-March period. Out of this amount, Islamabad will have to get rollover of $2 billion from the UAE by March-end
Meanwhile, there is another outstanding commercial loan repayment of $700 million to Chinese banks which Pakistan is expecting to be refinanced. The principal amount of debt servicing stands at $5.035 billion while the interest repayment is hovering around $426.88 million, so the total outstanding amount has gone up to $5.462 billion.
Geneva conference and IMF
As Prime Minister Shehbaz Sharif reached Geneva to co-host in an international conference, Pakistan and the IMF will also sit together to deal with the outstanding issues between the two sides.
In this connection, the IMF (International Monetary Fund) said the recent telephone call between Shehbaz Sharif and Kristalina Georgieva took place at the request of Pakistan. Georgieva is the IMF Managing Director.
“The call took place in response to a request by the Prime Minister of Pakistan to discuss the International Conference on resilient Pakistan”, IMF Resident Representative Esther Perez said.
An IMF delegation would meet Finance Minister Ishaq Dar on the sidelines of the Geneva conference, aimed at gathering international support for Pakistan in the aftermath of devastating floods last year, on January 9 (today), Perez said.
She said that the IMF managing director had a constructive call with the prime minister in the context of the International Conference on Resilient Pakistan and Georgieva also supported Pakistan’s efforts for a resilient recovery.
On Friday, Shehbaz had said in a speech that the IMF managing director had contacted him and added that a delegation would arrive in Pakistan within days. However, the finance ministry sources later said that no dates for the IMF review mission had been finalised yet.
Meanwhile, Shehbaz on Monday told the opening session of the International Conference on Climate Resilient Pakistan said the world was standing at a “turning point of history” today.
“It’s not only a question of how to survive but it’s a question [of] how to maintain our bodies. It’s a question of how to maintain our dignity and honour — by moving forward with a sense of purpose and a sense of achievement.”
“One can go on and on but to truly say, we are racing against time. We are thankful for the support extended to us by the Asian Development Bank, UN, International Monetary Fund and several other international organisations.”