Pakistan’s foreign reserves may drop below Cambodia’s: report
KARACHI: Amid looming slowdown of Pakistan’s economic growth, a latest report by the Bloomberg indicates that Pakistan is depleting its dollar reserves at the fastest pace in Asia and may soon drop below Cambodia’s foreign reserves – an economy that’s less than a 10th of its size.
According to data released by the International Monetary Fund, reserves have dropped by about a fifth in the past year to reach $13.5 billion in February, while in Cambodia they’ve increased a third to $11.2 billion in January,
Pakistan’s reserves are expected to drop as much as $2.2 billion by June, according to Insight Securities Pvt as cited by the Bloomberg.
“Your hot money capital inflows are not coming in. Real conditions of the economy are that exports are not picking up,” said Turab Hussain, head of the economics department at the Lahore University of Management Sciences. “Bangladesh are the ones that are a stronger economy now.”
Pakistan is facing a balance of payments crunch. Its current-account deficit has ballooned by 50 percent in the past eight months to $10.8 billion, fueled by rising imports as the economy grows close to 5 percent and Chinese funders add new power plants. With reserves coming under pressure, authorities devalued the currency for the second time in four months last week.
New Zealand and Kazakhstan are among other Asia Pacific countries with smaller economies but more reserves than Pakistan, according to data compiled.
“There is no easy fix,” said Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC. “The solution lies in improving the business climate” to attract greater foreign direct investment inflows and implementing reforms to make exports more competitive globally, he said.
There’s no respite seen for Pakistan’s reserves with authorities deciding not to sell global bonds this month because of rising global interest rates.