Flood aid lifts reserves to $17.5 billion

KARACHI: Pakistan’s foreign exchange reserves rose by $354 million to $17.518 billion by the week ended June 11, 2011 mainly due to the inflow of flood aid from the United States, the central bank said on Thursday.

“The increase in weekly reserves position is due to $190 million US aid for flood victims and inflows of remittances and export receipts,” said Syed Wasimuddin, Director and chief spokesman State Bank of Pakistan (SBP).

Previously, the reserves stood at the level of $17.164 billion.

Due to recent transfers, the reserves held by the central bank increased by $358 million to $14.085 billion in the week under review as against $13.726 billion a week ago. The reserves position with other commercial banks was flat at $3.432 billion.

The US aid for the victims of August, 2010 floods was deposited in the central bank account on June 10.

After attaining record high level of $17.956 billion in March, 2011, Pakistan’s foreign exchange reserves started depleting on the back of heavy outflow due to the debt servicing. In the following weeks, the reserves at one point fell below the psychological barrier of $17 billion, a level first seen on January 1, 2011.

However, strong inflows of home remittances and export receipts in the following months supported the reserves regain the $17 billion-mark on May 21.

Exports of the country during May, 2011 were recorded $2.31 billion, lifting the 11-month export to a record $22.44 billion.

Similarly, the remittances grew impressively to $10.09 billion in July-May 2010/2011 as against $8.064 billion in the corresponding period last year, depicting a rise of 25.2 percent.

Forex reserves of the country sunk to $6.59 billion in November, 2008 amid a sever balance of payment crisis.

The liquidity crisis came to an end after the International Monetary Fund (IMF) approved a standby arrangement of $7.6 billion in November, 2008 which was further enhanced to $11.3 billion in August, 2009.

Pakistan and the IMF ended talks last month in Dubai to discuss budget targets for 2011/12 fiscal year. They are due to meet again in July to discuss the possible release of the sixth tranche.

Analysts said that the reserves position would improve in coming weeks owing to possible release of the IMF tranche and payment against coalition support fund by the United States.