Overseas Pakistanis’ bounty fails to pull economy out of doldrums

As the Pakistan Peoples Party government is about to complete its five-year tenure, amazing economic figures have appeared in official documents, showing failures of economic managers.

The State Bank of Pakistan’s January Statistical Bulletin reports that overseas Pakistanis sent $48 billion during four-and-a-half years, but this could neither control free fall of local currency against major currencies, nor it helped improve foreign exchange reserves.

It also failed to improve poor external accounts position. The rupee-dollar parity four years back was Rs62. Over the weekend, the dollar was changing hands at Rs98. The report reveals that during this period, local currency depreciated by 58 per cent against the dollar which changed the economy based on highly vulnerable exchange regime. Massive interest-free remittances even failed to change the pale face of the currency and overall economy.

Remittances continued to rise. In 2008-09, these stood at $7.81 billion, in 2009-10, the figure increased to $8.9 billion, $11.2 billion in 2010-11, and $13.2 billion in 2011-12. During the first half of the current year, remittances rose to $7 billion.

In case of rupee-dollar parity, the depreciation of local currency was huge which made the cost of imports much higher only to push up inflation. The 58 per cent deprecation of rupee during this period kept pressure on economy while business community lost faith in local currency.

There is a general understanding that the business community calculates profit and loss in terms of dollars despite trading in the local currency. Most of them, including some common people, prefer keeping their deposits in dollars.

It is not a surprise that dollars held by private banks have been rising compared to the central bank. Since July 2011, reserves of the central bank fell from $14.7 billion to $8.7 billion on January 4 this year. However, reserves of commercial banks rose to $4.7 billion in January this year as against $3.5 billion in July 2011.

The economics managers failed to even manage the current account with the help of huge inflow of $48 billion and another help of over $8 billion from the International Monetary Fund during this period. Last year the current account deficit was $4.6 billion, and there seems no chance of improvement this year as five months data shows that the current account was in deficit this year. The external debt of the country is also rising which has touched the peak of $66 billion. Five years back it was about $44 billion. It has become extremely difficult for the country to service its external debt that was around $4 billion per year and is rising with the increasing debt.

A currency expert said the huge inflow of remittances could be used to bring a growth in economy that could help the country to improve its external accounts position.

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