Forex Reserves show True Picture of Economy
Foreign Exchange Reserves are an important economic indicator that shows the true picture of any economy and draws the attention of foreign Investors. Situation of FERs is far better than the past but still a lot of work has to be done. Efficiently mechanism and prudent economic policies are need of the hour to supoort Pakistan growing economy. This was upshot of the speeches delivered at a seminar on “Strengthening Foreign Exchange Reserves and Providing Lucrative Invectives” here at the Lahore Chamber of Commerce & Industry on Tuesday. The LCCI Senior Vice President Amjad Ali Jawa, Vice President Muhammad Nasir Hameed Khan, CEO/Director of LSE Financial Services Ltd Asif Baig Mirza and Convener of the LCCI Standing Committee on Foreign Investment & Privatization Mian Muhammad Nawaz were prominent amongst the other experts. Syed Mahmood Ghaznavi, Tahir Manzoor Chaudhry, Ch. Khadam Hussain, Adnan Khalid Butt, Tanvir Ahmed, Moazzam Rasheed, Shahid Iqbal Butt and Ch. Wajid Ali were also present on the occasion.
Speakers said that the size of the Foreign Exchange Reserves is markedly important now, especially the post-globalization era, due to increased global trade, capital flows and currency volatility. They said that most of the foreign trade is done in US Dollars, as a medium of Exchange so healthy foreign exchange reserves are the pressing requirement. During any crisis, foreign exchange reserves come to the rescue of any country to absorb the distress, related to such crisis. They said that foreign Exchange Reserves enhances the capacity of the Central Bank of the country to intervene in the foreign exchange market to manage exchange rate stability.
The LCCI Senior Vice President said that Pakistan’s foreign Exchange Reserves reached at the historic heights level of $ 24 billion in October 2016. He said that though situation is quite satisfactory but foreign Exchange Reserves could increase further if we manage to control trade deficit. He said that Overseas Pakistani have sent home a record amount of about $ 20 billion during 2015-16. The overseas Pakistani workers remitted $19.9 billion during the year which shows growth of 6.38% compared with $ 18.719 billion received during fiscal year 2014-15. He said that incentives should be given to Pakistani workers working abroad to encourage them to use only banking channel for remittances. He said that Pakistani should be marketed to the foreign investors. Initiatives should be taken to make our ranking in ease of doing business. He said that conducive environment should be built for confidence building, policies should be made more practicable and predictable.
The LCCI Vice President Muhammad Nasir Hameed Khan said that those hitches should be removed that are hampering the smooth running of the businesses in general and promotion of foreign Direct Investment in particular.
CEO/Director of LSE Financial Services Ltd Asif Baig Mirza in his presentation said that foreign Exchange Reserves add to the comfort of market participants that domestic currency is backed by external assets and hence it also helps the equity markets of the country with lesser country risk, better credit rating, more foreign portfolio investment and stable exchange rate. He said that FERs are an important catalyst for pover alleviation, economic growth and development. These also helps to import raw material, machinery and capital goods, fuel and essential commodities to meet the shortage and follow the growth trajectory. It is the most important part of the toolkit in economic management and especially for containing trade deficits and maintaining exchange rate stability. He said that State Bank of Pakistan should allow reduced interest rate for such foreign investors, on a part of their Pak-Rupee borrowing, for making investment in prioritized areas.
Mian Muhammad Nawaz said that foreign exchange reserves could be built through exports, inward remittances, foreign direct investment, foreign portfolio investments, official development assistance, borrowing through International Capital Market and Bilateral arrangements.