Pakistan’s Forex Reserves Are Not Built on Loans: SBP Governor

Governor State Bank of Pakistan Reza Baqir has stated that Pakistan’s foreign exchange reserves are not increasing due to foreign loans but through other inflows thanks to the improving sentiments of investors.

Addressing a media briefing, he said that foreign exchange reserves were built up using foreign loans by the previous governments, however, the current government won’t be doing it. This was also recognized recently by staffers of the International Monetary Fund.

The sentiments of foreign and local investors are getting better due to improvements in the microeconomic indicators and economic reforms.

The participation of local banks and foreigners in government papers is increasing, showing the confidence of investors in the Pakistani market as previously they were only investing in foreign bonds. It’s a good sign that foreign investors are also investing in debt securities. In addition, the stock market has also attracted massive foreign investment.

Not only has the current account deficit improved, but the fiscal deficit has also been contained by the government due to initiatives taken a few months ago. The government did not borrow a single rupee from the central bank and did not print extra currency notes, added the SBP Governor.

The exchange rate of rupee against the US dollar has also stabilized. Export volumes in different sectors such as textile and leather recorded healthy growth in the last few months, which is a good omen for the economy.

The inflation rate is unlikely to go beyond the level set by SBP either.

Govt’s Economic Policy is Export-Oriented

The government has decided to set the economic model to favor exports, hence it will promote exports through various loan packages and initiatives under ease of doing business.

The country’s economic growth is sustainable only if its exports are increasing, he remarked.

SBP has additionally increased the limit of loans for exporters under Export Financing Scheme and Long-term Financing scheme by Rs. 100 billion. Accordingly, exporters will get loans at a rate of 3 percent for short-term exports and 5 to 6 percent for long-term export projects.

The central bank has imposed a restriction on advance payments for imports earlier this year under its reform policy, which helped the economy achieved the set results.

Now, the import of goods and services can go up to $10,000. The lower limit is meant to encourage SMEs but not manufacturers who will be provided facilities under ease of doing business, said Reza Baqir.