Foreign exchange reserves hit all-time high of $18.714 billion

KARACHI: Pakistan foreign exchange reserves rose to a record high of $18.714 billion last week due to inflows of foreign aid funds and increase in remittances from overseas Pakistani, data showed on Thursday.
The total liquid foreign reserves held by the country stood at $18.714 billion as on July 03, 2015 -- a new record for the country, which is expected to grow at a pace of over 5 percent in fiscal 2015/16.
The reserves were up 2.8 percent compared with $18.201 billion as of June 26, 2015, the central bank said. During the week under review, the central bank made payments of $72 million on account of external debt servicing and other official payments.
Analysts estimate currency reserves now provide more than a month import cover, well above the around one week of cover in 2013.
A banker said higher export proceeds, inflow of remittances coupled lender’s proceeds helped reserves grow steadily. Low oil prices in the international market also helped the country save a substantial amount on account of import bill.
Ahsan Mehanti at Arif Habib Commodities said the local currency was under some pressure in the last week and higher reserves would ease this pressure. Moreover, it would have a positive impact on CPI inflation and yet no influence on the next monetary policy.
“Higher foreign exchange reserves would reduce repatriation of corporate dividend and the money will be reinvested; foreigners will be more inclined to invest in the country and local currency will be strengthened.”
Mehanti said it would also bode well for the country’s economic market and foreign portfolio investment would likely go up.
Overseas investors poured in large amounts of money in local equities market in line with the country’s expected high growth.
Currency experts believe that higher reserves, particularly of the State Bank, help stabilize the exchange rate. Low SBP reserves attract speculation which directly hits the local currency, as

witnessed in the recent past.
During the week ended July 03, SBP’s liquid foreign exchange reserves increased by 447 million to $13.535 billion compared to 13.088 billion in the previous week. Net foreign exchange reserves held by commercial banks stood at $5.179 billion as of July 03, 2015, a 1.3 percent surge on weekly basis.
“The increase in reserves is mainly attributable to receipts of $514 million from multilateral and bilateral resources, which includes $506 million received from IMF under extended fund facility (EFF),” SBP said.
Analysts said the latest IMF tranche was reflective of country sound economic outlook.
Currency dealer Malik Bostan said foreign remittances had increased significantly as it always happened in the month of Ramazan.
“Remittances through the exchange companies surged by 30 percent in June as overseas Pakistanis remitted more for donations and charities as well as for Eid spending.”