The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has stressed the need for stopping a steep decline in foreign exchange reserves of the State Bank, terming it the key economic challenge for the new government, as the ballooning trade deficit along with dried up dollar inflows and external debt payments have plunged the foreign exchange reserves to a record low since Dec 2019.
FPCCI former president and BMP Chairman Mian Anjum Nisar observed that the since imports were rising at a rapid pace, the new government would likely to continue with import restricting policies, as the SBP has already increased the list of items subject to 100 percent cash margin requirement to control inflation and import bill.
Debt repayments have put pressure on forex reserves with the SBP, which fell by $5.5 billion during Feb 28 to April 8, 2022, to $10.8 billion. The decrease partly reflects repayment of a $2.4 billion loan from China that is scheduled to be renewed.
The urgent task that needed to be taken up was foreign exchange reserve management and for this purpose the major focus should be on negotiation with the IMF, he said. Strong relations with the US, China, and Saudi Arabia are very important in determining the outlook of foreign flows to the country and roll over of maturing debt.
Moreover, initiatives for overseas Pakistanis such as Roshan Digital Account should be prioritized and proper channel flows for remittances should be maintained to keep foreign reserves afloat. He believed that the currency should be allowed to remain at its market determined level, and take any pressure from the external account. Since Jan to April, the rupee has depreciated by 6.2 percent against the dollar, whereas the real effective exchange rate as per the latest SBP report hovers at 97.91 as of Feb.