FINANCE Minister Ishaq Dar recently felt elated after our foreign exchange reserves crossed the $18bn mark. I would like to put the matter in its true perspective.
The total reserves stood at $18.2bn at the end of June. Out of $18.2bn reserves, the amount of free reserves with the State Bank of Pakistan are $13bn plus. The remaining $5bn represents deposits with commercial banks and is the liability of the country. The free reserves of $13bn plus held by the SBP equal three-and-a-half months of imports.
This is very low and a cause for concern.
Free reserves with the SBP have been built up by borrowing funds from international institutions. These loans would be due for repayment in the coming years and would be repaid from the SBP reserves. The free reserves with the State Bank would thus disappear.
