The total foreign exchange reserves have fallen to $9.078 billion on November 18, down from the previous total of $9.510 billion. The fall of $432 million mostly took place in the reserves held by the State Bank of Pakistan, whose holdings fell from $4.225 billion to $3.845 billion, a fall of $380 million. This implies that official reserves cannot cover a whole month of exports. This is not the bottom of the trough. The repayments due in the coming few days mean that the State Bank will have to pay out $800 million in November, drawing reserves further down.
The IMF seems to be behind the problem, for the repayments are going to it, and thus the standby arrangement reached recently has been shown as not proving to be the panacea it was trumpeted to be. One tranche of $550 million has already been received of the $6.64 billion arrangement made in September, and has apparently disappeared without trace. It must be remembered that the nation had to make tremendous sacrifices to qualify for the IMF package, and this time, the IMF insisted on obedience to its conditionalities before making any disbursements. Another tranche of $550 million, is due in December, just after the drawdown of the reserves will have placed the greatest pressure on the rupee. It should not be forgotten that it was just such pressure which had set off the recent fall in the rupee’s value, which was only arrested when the US government shut down, and the State Bank warned the commercial banks of serious consequences.
It would only be in the fitness of things for the government to begin preparing for further pressure on the rupee as it scrambles to make payments to the international financial institutions. The need to set a personal example must be conveyed to all public servants, both elected and permanent, and measures to conserve foreign exchange must be concerted. It would not be possible to restrict the import of food and medicines, but the fuel bill needs close examination, imported not just for motor transport, but also for power generation. Therefore, any further power conservation measures would not only alleviate the power shortage problem, but would also help the foreign exchange problem.
It should also be noted that the reserves were built up during the Musharraf years, which also saw the only time Pakistan successfully completed an IMF programme. There may be some truth in the government’s claims that the previous government’s extravagance led to vast sums being borrowed unproductively, but the present runs on the rupee are a problem we face now. The blame game is unhelpful; solutions are required.