It keeps getting worse for Pakistan’s foreign currency reserves as they have hit a new low. Bloomberg reports that Pakistan is using its dollar reserves at the fastest pace among all countries in Asia.
At this pace, Pakistan’s reserves might soon drop below Cambodia, a sovereign state whose economy is ten times smaller than that of Pakistan.
Pakistan vs Asia
According to data from International Monetary Fund (IMF), Pakistan’s reserves are depleting at a faster rate than any other country in Asia. Cambodia’s dollar reserves increased to $11.2 billion in January while Pakistan’s dropped by 21.6% to touch $13.5 billion over the year.
Even Bangladesh has a stronger economy than Pakistan at the moment. Bangladesh’s foreign reserves are double than that of Pakistan with more exports as well. In Asia Pacific region, New Zealand and Kazakhstan beat Pakistan in terms of more foreign reserves as well, despite being smaller economies.
Here is how Pakistan compares with some other countries.
The primary reason behind depletion of foreign reserves is the ever-increasing trade deficit. Despite tough import regulations, Pakistan has failed to curb imports which has led to an unbalanced economy. Pakistan’s economy is growing at a rate of 5% due to CPEC and other foreign investments, however, Pakistan has failed to build up its foreign reserves. According to Insight Securities, the reserves are projected to fall by an amount of $2.2 billion by June 2018.
The dollar hit an all-time high value against rupee as Pakistani currency was devalued twice in the last four months. The imports will still remain the same as for instance most of the automobile companies have to import parts even for the locally assembled vehicles. The rates, however, will surely go up as major companies like Toyota, Suzuki, and Honda have already jacked up their prices.
The conditions are expected to go even worse as the experts are forecasting a further decrease in reserves in the upcoming months.
The government recently borrowed $2.5 billion but the reserves have failed to grow. Authorities are planning to introduce a tax amnesty scheme in the upcoming month which is projected to bring in $4-5 billion. That move might prove helpful in accumulating the foreign currency reserves of Pakistan.