The government policymakers are thumping their chestson the increase of foreign exchange reserves from $6.64 billion in June 2013 to nearly$20 billion in October 2015 as the Pakistan Muslim League-Nawaz has crossed almost half of the term at the helm. The PML-N government had entered a three-year loan programme in the first quarter of fiscal year 2013-14 with the International Monetary Fund after coming to power with a pledge to bail out the country from balance of payment problem and fear of a default on international payments. However, the financial managers had failed to visualize the risks involved in the borrowed money. Though the country is no more in a state of possible default or balance of payment crisis, the money lying with the state bank of Pakistan is raised either through global investors or has been borrowed from international financial institutions.The daily Inflows and outflows make it impossible for the economists to ascertain the real situation of the borrowed money in foreign exchange reserves.
Pakistan has received at least $4.5 billion from the IMF since 2013 and has raised $3.5 billion by floating Sukuks and Eurobonds in the international bond market.The State Bank has made it clear to the government on several occasions that it is not in favour of the government approach to raise foreign exchange reserves through borrowings.The government tenure is going to end in 2017 and a new government will have to start repayments to the Paris Club in 2016-17 following the debt rescheduling of December 2001.The repayments to IMF will start from 2017-18. The country’s debt servicing capacity is in question until the nation is able to achieve a sustainable growth by real earnings from exports,increase in remittances from expatriate Pakistanisandrationalisation of the import bill.
Ishaq Dar, the economic wizard of the PML-N,is not interested in any alternative plan to fend off the possible financial crisis after the government completes its tenure in 2017, leaving a legacy of financial maladministration for the next government. It should also be noted that the Coalition Support Fund will also be not available while the new government will have to allocate an annual amount of $1.8 billion for debt servicing. The current stockpile of $20 billion,consisting of debt and grants, would be drained off when repaymentsto the IMF and other donor agencies will start. According to experts, the foreign exchange reserves, based on the borrowed money,are not a reflection of a stable economy. Only real economic growth is the panacea to the economic woes.