Foreign exchange: SBP's reserves plunge another 4.43%, now stand at $10.3bafter Decreasing $479 Mill

[SunilM]

Foreign exchange: SBP's reserves plunge another 4.43%, now stand at $10.3b after Decreasing $479 Million in a Week.

Foreign exchange reserves held by the State Bank of Pakistan (SBP) again came under severe pressure, falling 4.43% on a weekly basis, according to data released by the central bank on Thursday.



The fall sparks concern over Pakistan’s ability to meet future payment obligations and manage a bulging current account deficit.

On May 18, foreign currency reserves held by the central bank were recorded at $10,320.2 million, down $478.7 million or 4.43% compared with $10,798.9 million in the previous week.

The decline in reserves was attributed to payments on account of external debt servicing.

Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,652.2 million. Net reserves held by banks amounted to $6,332 million.

Foreign exchange: SBP’s reserves plunge 3.26% to $10.8b

In April, SBP’s reserves increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.

A few months ago, foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank.

Earlier, the SBP received $350 million under the Coalition Support Fund (CSF). In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.

Trouble ahead?

Pakistan’s reserves have plummeted over 43% from a record high of $18.14 billion at the end of June 2016, according to SBP data.

The reserves touched the peak after Pakistan borrowed $6.6 billion from the International Monetary Fund (IMF) under a 36-month Extended Fund Facility that ended in September 2016.

Foreign exchange: SBP’s reserves fall 3% to stand at $11.2b

Since then, the reserves have been on the downtrend as economic managers have largely failed to find new markets to increase the country’s exports and restrict growing imports, which was the largest source of shrinking foreign exchange reserves.

Pakistan’s imports stood at $45.56 billion for first 10 months of the current fiscal year, which were more than double the value of exports that amounted to $20.55 billion.

The government let the rupee depreciate by around 9.5% in two rounds – 5% in December 2017 and 4.5% in March 2018 – in a bid to shore up reserves by encouraging exports and discouraging imports.

The move has helped a little bit in improving exports, but has failed to curb excessive imports and added to the country’s external debt.

Experts believe that increasing oil prices will not bode well for Pakistan, which may be forced to go back to the IMF for a bailout package if reserves continue to slide.

https://tribune.com.pk/story/171821...reserves-plunge-another-4-43-now-stand-10-3b/

The clock is ticking.....Three Billion dollars have to be paid to IMF alone in June 2018 and that is excluding payments towards the export bill for with Pakistan needs 2 billion dollars a month. PML-N has created the perfect storm for the care taker govt.

 

[4GTejasBVR]

No problem china will lend more money I think as per recent news . All lends are good as profit will be more

 

[Dark-Destroyer]

but why are you so hurt tho? - doesn't bother you so why so much concern worry about your self...

 

[SunilM]

Pakistan’s growing indebtedness

• RECORDER REPORT
  
• MAY 24TH, 2018

External debt payment (inclusive of principal due) was estimated at 4.969 billion dollars according to the State Bank of Pakistan (SBP) website during the first nine months of the current fiscal year 2017-18. This is an extremely disturbing figure for two reasons. First, it does not obviously reflect the entire year's figure, but a merely 66 percent of the period, and with financing needs rising due to decisions taken by the PML-N government whose tenure expires one month before the end of the fiscal year, and revenue projections for the last two months grossly overstated, it is extremely likely that more loans, international and domestic, may have to be incurred. Pakistan is currently not on an International Monetary Fund (IMF) programme and therefore it is highly unlikely that multilaterals would extend programme loans/budget support at lower rates than available on the market. This would imply that the Caretakers may be compelled to borrow from foreign commercial banks - a source that was unwisely increasingly tapped by the incumbent government, at rates that are close to 12 percent with an extremely short amortization period that may further compromise the flexibility to undertake policy reforms by the next elected government.

Secondly, 2.5 billion dollars repayment on external debt is due next month as per Miftah Ismail, Federal Finance Minister. Foreign exchange reserves on 11 May 2018 were estimated at 10.79 billion dollars as per the SBP website which would decline to 8.9 billion dollars once the 2.5 billion dollar payment is cleared and barring higher exports relative to imports (again highly likely) Pakistan would have reserves to meet less than two months of imports. Would these reserves be sufficient to provide a buffer against shocks to the economy? The IMF undertook a survey titled "Assessing the Need for Foreign Currency Reserves" in which it argued that "traditional 'rules of thumb' that have been used to guide reserve adequacy suggest that countries should hold reserves covering 100 percent of short-term debt or the equivalent of 3 months worth of imports;" and argues that there is a need to use "risk-weighted metric capital stock used to assess bank needs covering potential vulnerabilities from falling export income, sudden stop in short-term debt inflows, outflows from other debt and equity liabilities and resident capital flight. Pakistan's performance is extremely poorly with respect to all these elements."

It is relevant to note that the foreign exchange reserve situation has deteriorated during the current fiscal year. On 17 September 2017, total reserves were estimated at 13.8 billion dollars which declined to 13.4 billion dollars by 17 October 2017. By 6 April 2018, reserves had declined to 11.4 billion dollars and by 11 May 2018 there was a further decline to 10.79 billion dollars. The incumbent government is reportedly considering a 28 billion rupee export package as a means to strengthen exports and therefore reserves however it must be borne in mind that the 180 billion rupee export package announced in January 2017 failed to raise exports (true, it was partially implemented but refunds were not cleared estimated at over 200 billion rupees and tariffs were higher than in competing countries) while imports continued to grow widening the trade gap. Thus with a 28 billion rupee package it appears to be unlikely that total refunds will be cleared by 31 May this year.

The SBP's website further reveals that the government borrowed 2 trillion rupees during the first 10 months of the current fiscal year raising the total domestic debt to 16 trillion rupees - already higher than 15.4 trillion rupees estimated in the Economic Survey 2017-18. This would further constrain the next government if it opts to go back on an IMF programme as its standard conditionality is to bring borrowing from the SBP to zero.

To conclude, it is imperative that the Caretakers consult all the major mainstream parties and form a consensus on how to deal with the debt left behind by the PML-N government and how much, if any, to incur to balance the books by end June 2018 and from what source.

Copyright Business Recorder, 2018

https://fp.brecorder.com/2018/05/20180524373953/

but why are you so hurt tho? - doesn't bother you so why so much concern worry about your self...

First.Type in vernacular and not in English. Second. You have got to do a better Job than this!

 

[Nilgiri]

@Samlee response incoming in 3...2....1

Abbot and costello routine it has become like haha

 

[SunilM]

No problem china will lend more money I think as per recent news . All lends are good as profit will be more

And right on que......

China gives Pakistan $1.6bn credit line to boost reserves
By
Agencies

May 24, 2018

China has given Pakistan a credit line worth $1.6 billion to stave off a balance of payments crisis, two Pakistani central bank sources said on Thursday, with cash earmarked for boosting fast-depleting foreign currency reserves.

Two State Bank of Pakistan (SBP) sources told international news agency, Reuters, the credit facility that accompanies a currency swap agreement between SBP and China’s central bank has been hiked to 20 billion yuan ($3.13 billion) from 10 billion yuan.

“This arrangement has been finalised,” said one SBP source, who spoke on condition of anonymity. A second source confirmed the agreement and the figures.

Earlier on Wednesday, SBP Governor Tariq Bajwa confirmed China has been assisting Pakistan to stave off a foreign currency crisis.


In an interview to, Tariq Bajwa said $1 billion financing had been obtained from Chinese banks in April to help avoid a foreign currency crisis and were at “good, competitive rates.”

The country’s foreign exchange reserves have been sliding since reaching a high in October 2016 and stood at $10.8 billion on May 11.

Chinese-backed loans are expected to bolster the falling finances of Pakistan and expected to further cement the financial, political and military ties between the two countries, said FT.

Pakistan obtained $1.5 billion from China during the first ten months of the current financial year 2018-19.

Documents revealed that China has given $334 million in loans for the Orange line Lahore project, $691 million for Sukkur Multan, $273 million for Havelian Thakor and $88 million in the recently inaugurated Neelum Jhelum Hydropower project.

According to officials in Islamabad, China was fine with giving loans to Pakistan despite the financial crunch but does not want details of the loan to be made public.

In a statement to Financial Times, one civil servant said “The Chinese are not keen on western institutions learning the minute details of [financing of] CPEC projects. An IMF programme will require Pakistan to disclose the financial terms to its officials.”

As per a report in The News, in the wake of rising current account deficit that swelled to $14.035 billion in the first 10 months and resulting into slashing down of foreign currency reserves with every passing week, Pakistan was looking towards China as the last available option with expectations of receiving $01 to $02 billion on account of safe deposits before June 30, 2018.

One top official of the Finance Ministry confirmed to The News on Friday that Pakistan did not make any formal request to China for keeping dollars in the shape of safe deposits into the SBP, but Beijing had conveyed through informal channels that they might sanction putting $01 to $02 billion for keeping into Pakistan’s central bank in a bid to jack up the dwindling foreign currency reserves.

Currently, China’s $500 million is lying in a safe deposit with the SBP.

Pakistan had returned safe Chinese deposit to Beijing when the country’s reserves had reached comfortable position after graduating the IMF programme successfully during the tenure of former finance minister Ishaq Dar in September 2016.

https://profit.pakistantoday.com.pk...pakistan-1-6bn-credit-line-to-boost-reserves/

 

[somebozo]

there is $200 billion USD of wealth sitting in swiss bank..!

 

[SunilM]

there is $200 billion USD of wealth sitting in swiss bank..!

I don't know about 200 Billion, but you FM seems pretty desperate about 200 MILLION USD.

UAE banks to raise $200m loan for Pakistan
https://profit.pakistantoday.com.pk/2018/05/24/uae-banks-to-raise-200m-loan-for-pakistan/

 

[4GTejasBVR]

And right on que......

China gives Pakistan $1.6bn credit line to boost reserves
By
Agencies

May 24, 2018

China has given Pakistan a credit line worth $1.6 billion to stave off a balance of payments crisis, two Pakistani central bank sources said on Thursday, with cash earmarked for boosting fast-depleting foreign currency reserves.

Two State Bank of Pakistan (SBP) sources told international news agency, Reuters, the credit facility that accompanies a currency swap agreement between SBP and China’s central bank has been hiked to 20 billion yuan ($3.13 billion) from 10 billion yuan.

“This arrangement has been finalised,” said one SBP source, who spoke on condition of anonymity. A second source confirmed the agreement and the figures.

Earlier on Wednesday, SBP Governor Tariq Bajwa confirmed China has been assisting Pakistan to stave off a foreign currency crisis.


In an interview to, Tariq Bajwa said $1 billion financing had been obtained from Chinese banks in April to help avoid a foreign currency crisis and were at “good, competitive rates.”

The country’s foreign exchange reserves have been sliding since reaching a high in October 2016 and stood at $10.8 billion on May 11.

Chinese-backed loans are expected to bolster the falling finances of Pakistan and expected to further cement the financial, political and military ties between the two countries, said FT.

Pakistan obtained $1.5 billion from China during the first ten months of the current financial year 2018-19.

Documents revealed that China has given $334 million in loans for the Orange line Lahore project, $691 million for Sukkur Multan, $273 million for Havelian Thakor and $88 million in the recently inaugurated Neelum Jhelum Hydropower project.

According to officials in Islamabad, China was fine with giving loans to Pakistan despite the financial crunch but does not want details of the loan to be made public.

In a statement to Financial Times, one civil servant said “The Chinese are not keen on western institutions learning the minute details of [financing of] CPEC projects. An IMF programme will require Pakistan to disclose the financial terms to its officials.”

As per a report in The News, in the wake of rising current account deficit that swelled to $14.035 billion in the first 10 months and resulting into slashing down of foreign currency reserves with every passing week, Pakistan was looking towards China as the last available option with expectations of receiving $01 to $02 billion on account of safe deposits before June 30, 2018.

One top official of the Finance Ministry confirmed to The News on Friday that Pakistan did not make any formal request to China for keeping dollars in the shape of safe deposits into the SBP, but Beijing had conveyed through informal channels that they might sanction putting $01 to $02 billion for keeping into Pakistan’s central bank in a bid to jack up the dwindling foreign currency reserves.

Currently, China’s $500 million is lying in a safe deposit with the SBP.

Pakistan had returned safe Chinese deposit to Beijing when the country’s reserves had reached comfortable position after graduating the IMF programme successfully during the tenure of former finance minister Ishaq Dar in September 2016.

https://profit.pakistantoday.com.pk...pakistan-1-6bn-credit-line-to-boost-reserves/

UesYso problem solved for PAKISTAN

 

[SunilM]

UesYso problem solved for PAKISTAN

They have to go to China every month and ask for such largesse though. Also whats interesting to note it the manner in which Pakistan is being funded. Its like just enough of a dose is given to keep them afloat. Clearly, China has terms to negotiate and its waiting for the new government to be sworn in. Lets see how much of a shylock china will be when the new government is sworn in.

 

[Samlee]

@Samlee response incoming in 3...2....1

Abbot and costello routine it has become like haha

Thanx For The Heads Up Man

Indian rupee may hit lifetime low, breach 70 vs US dollar

The minutes from the US Federal Reserve's meeting overnight appeared to have reassured investors that the central bank will not be too aggressive with raising interest rates, forex dealers told PTI.

The Indian rupee on Thursday recovered from a near 18-month low by gaining 12 paise to 68.30 against the dollar at the forex market on fresh selling of the US currency by exporters and banks. The minutes from the US Federal Reserve's meeting overnight appeared to have reassured investors that the central bank will not be too aggressive with raising interest rates, forex dealers told PTI.



Besides selling of the dollar by exporters and banks, weakness in the dollar against some other currencies overseas propped the rupee, they added.

Brokerage Nirmal Bang believes the recent depreciation of the rupee can be attributed to FPI outflows from Indian markets - both equity and debt - over the past two months. It expects the rupee to test 70 to the US dollar as the political heat rises. However, its sees little reason for a tailspin.

"The Reserve Bank of India or RBI has sufficient fire power to provide support, although it has weakened compared to the past. We have increased our average USD-INR estimate for FY19 to 68.7 from 66 earlier, while our forecast for FY20 stands at 71.5," said Nirmal Bang in its currency outlook report.

Meanwhile, Edelweiss Securities expects the rupee to breach its lifetime low against the US Dollar and head towards the 70 level. "This would partly readjust the dynamics and help in recovery thereafter," Edelweiss said in a note.

WATCH ZEE BUSINESS VIDEO HERE

On Wednesday, the rupee had lost 38 paise to hit a near 18-month low of 68.42 against the US dollar following relentless capital outflows amid concerns over macro conditions and surging crude oil prices.

http://www.zeebiz.com/india/news-indian-rupee-may-hit-lifetime-low-breach-70-vs-us-dollar-48413

 

[Shah Khalid]

@Samlee response incoming in 3...2....1

Abbot and costello routine it has become like haha

Can i join as well


Vulnerability concerns: FPIs dump Indian bonds

The rupee lost 38 paise on Wednesday to drop to 68.426 against the dollar, the lowest level in nearly 18 months. Another 40 paise loss would take the currency to the all-time closing low of 68.825 seen on August 28, 2013.

Apprehensive that the rupee could weaken further as crude oil prices soar, foreign portfolio investors (FPIs) have dumped Indian bonds worth more than $4.5 billion over the past month or so. The sales in the equity market, at close to $1.63 billion over the same time, have been far smaller. However, the foreign exchange outflows have, in turn, aggravated the pressure on the rupee.

The rupee lost 38 paise on Wednesday to drop to 68.426 against the dollar, the lowest level in nearly 18 months. Another 40 paise loss would take the currency to the all-time closing low of 68.825 seen on August 28, 2013.

The weakness in the Indian currency was in sync with the fall in a host of other emerging market currencies during the day. Many of them recovered but the Turkish lira lost 3.5%.

Since January, the rupee has lost 6.7%. Over the past month, the US dollar Index — Dollex — has gained 3.5%. Treasury yields in the US have been rising over the past couple of months and hit 3.11% on May 17. The price of Brent oil was ruling at around $79 per barrel.

The weakening rupee could prompt foreign investors to offload more bonds market observers said, since otherwise their portfolios would continue to lose value. To be sure, other emerging markets which are vulnerable to rising crude oil prices have also seen sell-offs in their bond markets. Manish Wadhawan, MD and head of fixed income, global markets at HSBC India, points out there is some general aversion to emerging market bonds at the moment with a sell-off taking place across Latin America as well as Asian countries like Malaysia and Indonesia. The value of bonds outstanding in the FPI portfolio is close to $63 billion of which $33 billion is invested in gilts and $30 billion in corporate bonds.

Ananth Narayan, professor, finance, at SPJIMR, said that FPIs will likely continue to be nervous with the move up in oil prices, fears around fiscal slippage, the worsening external sector, politics and global geopolitics.

“Higher global oil prices impact us more than most other countries, given our significant oil import bill. The fear amongst carry traders, including some FPI in debt, is that if crude oil was to move up to and sustain at $100 a barrel or more, India could be counted amongst the fragile economies of the world all over again,” he said.

“In addition, Indian bonds are not part of global bond indices — off-benchmark holdings are vulnerable during risk-off periods,” Narayan said.

The Reserve Bank of India (RBI) recently revised the rules for investments by FPIs in Indian bonds, allowing a lower residual maturity for some categories of bonds

https://www.financialexpress.com/economy/vulnerability-concerns-fpis-dump-indian-bonds/1179117/

 

[somebozo]

Citizen have no faith in the Pakistani state..many citizens are converting their savings to USD..as they fear the upcoming election..such is a fragile state of Pakistan..!

 

[SunilM]

Citizen have no faith in the Pakistani state..many citizens are converting their savings to USD..as they fear the upcoming election..such is a fragile state of Pakistan..!

What is more important is that citizens should immediately withdraw their dollars from banks as capital control should kick in next month when the care taker government takes over and the true extent of debt is revealed. Also Forex would be around 6-7 billion dollars so financial emergency will be imposed in one form or another.

 

[Dogra]

India can sustain its growth if oil prices are between 60-65 $ or below. It will see heavy pressure if oil prices stays above 70 for long.

Anyway we are going to see a cut in our overall imports by at least 20% & cut in defence imports by 25-30% from 2022. Our exports are going to also increase by 10-15% by the same period. This will balance out our Forex drain on oil & push our sustainability to near 100$ per barrel. We will also start slowly reducing or debt to GDP ratio from near 70% to around 50% by 2030.

From 2025 we are going to switch to electric cars & fully ban production of fuel based vehicles by 2030. This will cut down our oil imports by 40-50% from 2030. So I think till this period, Indian economy is going to be in a roller coaster ride though it will keep growing, it's not going to be a easy ride. The major crisis we are going to face from 2025 will be population related issues - which are unemployment, sanitation, water crisis, housing, infrastructure, traffic, pollution, health care, food shortage, etc