The State Bank of Pakistan expects the foreign exchange reserves to exceed 13 billion dollars by end June 2015 on the back of continued financial inflows. The main risks to this assessment, according to SBP, are uncertainty over international oil prices and possible delays in planned foreign inflows.
According to SBP, exports to grow in the range of four to six percent in FY15 while imports to rise by six to eight percent in FY15. This projection translates into a trade deficit of 17.1 to 18.4 million dollars ie 5.5 to seven percent of GDP. Assuming 1.2 billion dollars in CSF, 300 million dollars from the sale of 4G licence and workers remittance of 16.5 billion dollars the external account deficit is expected to stay within one percent of GDP, SBP forecasts.
In addition, says SBP, planned privatisation of OGDCL and other public sector entities, planned issuance of the Eurobond ($ 500 million) and Sukuk ($ 500 million) in international markets and programme financing from multilateral donors under the IMF programme would also help in maintaining the upward trajectory in foreign exchange reserves in FY15.
Nevertheless, says SBP, the sustainability of the external sector in the medium term could become challenging especially in the post-IMF programme years. Sustaining the recent improving trends over the medium term needs additional efforts to ensure better law and order, address energy sector issues, carry out fiscal reforms and improve economic governance. This would restore investors confidence and create non-debt creating inflows which remain at the heart of external sector sustainability, according to SBP.