ISLAMABAD-As the State Bank of Pakistan reported that the nation’s overall foreign reserves amounted to $13,079.1 million. Pakistan’s foreign reserve levels have experienced a downward trend in recent months due to a number of contributing factors. These include fiscal deficits, trade imbalances, inappropriate government spending, reduced remittances from overseas Pakistani citizens, an increase in debt obligations, and inefficiencies within the public sector organisations.
Low foreign reserves can put a country in a challenging position in the global markets, making it difficult to finance essential imports and maintain exchange rate stability. Several elements play a pivotal role in corroding Pakistan’s foreign reserves. To begin with, the underground black-market trading of USD has considerably drained the nation’s precious foreign exchange reserves. Furthermore, the persistent issue of widespread smuggling of oil and gold has compounded the problem by diverting foreign currency away from official channels. Additionally, while import restrictions were initially implemented to safeguard foreign exchange, they have, on occasion, inadvertently increased the growth of informal networks and illicit black-market transactions. Not only these, the discrepancy between interbank and open market exchange rates has created arbitrage opportunities, enticing Pakistani expatriates to utilise unofficial remittance channels, thereby intensifying the pressure on the country’s foreign reserve position.
Rashid Ashraf, the CEO of ACE Money Transfer, a regulated remittance provider playing a vital role into bringing much needed inflows of remittances to Pakistan, says, “While the framework for addressing the challenges related to foreign reserves depletion exists, the essence of the solution is rooted in the effective enforcement and realisation of existing policies and laws, which has been hampered by various underlying issues that the nation faces.” To safeguard Pakistan’s foreign reserves, a multifaceted strategy is imperative. Firstly, there is a pressing need to tighten border security. This involves the integration of advanced surveillance technology and infrastructure at border crossings to detect and deter smuggling activities effectively.