The Finance Ministry has informed the cabinet, that foreign exchange reserves of the country in the last full year of Pakistan Muslim League (N) Government was $2.4 billion and not $1.7 billion as claimed by the previous government.
Mandarins at the ministry had to revise the table shown to the Cabinet on April 9, 2008 after Federal Minister of Finance Ishaq Dar noted some inconsistencies in the data relating to reserves held by commercial banks, which were counted for more in recent times and not for years prior to 1999-2000. When taken on consistent basis at the end of June 1999 they amounted to $2.4 billion ie 40 percent more than earlier shown in the presentation to cabinet.
The two charts now submitted by the Finance Ministry show significant discrepancies between the data that was presented at the April 9 cabinet meeting and the corrected version. The correct chart prepared at the end of March 2008 now shows that foreign exchange reserves in 1990-91 were $0.7 billion and the original chart of April 1st gives reserves of $0.6 billion. Likewise, figures of 1991-92, in corrected version show reserves of $1.1 billion which were originally submitted as $1.0 billion.
Under the current definition private deposits placed with banks under the F.E. 25 Scheme do not form part of SBP's liquid forex reserves. Commercial banks forex deposits less advances are now shown as net forex with banks.
Apparently the original forex position is based on weekly liquid forex available to SBP. And, the corrected version is based on SBP's statistical bulletin which includes NOSTRO forex funds with the banks to undertake trade transactions. NOSTRO funds go up and down on a daily basis.
The forex held by banks in their NOSTRO accounts are part of net foreign assets (NFA) of the banking system and are not shown as SBP forex holdings. After swap deals undertaken by some telecom companies in 2005-06 the NOSTRO amounts have exploded from $50m to as high as $800 million at present.
As a consequence, one can note the big difference in the original April 1st data and the revised March 31st data. SBP only counts forex in its accounts plus SDR available for draw down.
According to knowledgeable economist forex holdings are co-related to the number of weeks/months import bill. Adverse trade balance and bloating current account deficit 8in the current fiscal year has reduced Pakistan's ability to meet its forex obligations largely due to abnormally high oil payments and unanticipated wheat imports.