Pakistan denies report on foreign reserves depletion

Asian Economic News, Dec 14, 1998

ISLAMABAD, Dec. 11 Kyodo

Pakistan on Friday denied reports that its foreign exchange reserves will be wiped out by Jan. 15, 1999 as a result of a repayment of its debt obligations due in two weeks. Finance Minister Ishaq Dar told a press conference that Pakistan has taken steps to meet its next repayment on its 40 billion dollar foreign debt without having to draw heavily on foreign exchange reserves, which currently stand at 480 million dollars. ''All payments to preferred creditors will be paid within the grace period (ending Jan. 15, 1999),'' he said, adding that the situation is not worrisome since a scheduled disbursement from a 1.3 billion dollar International Monetary Fund (IMF) package is due next month. Pakistan has been facing a foreign exchange crisis since August this year. Since then it has ceased servicing debts to bilateral donors and commercial creditors, only making repayments to the IMF, World Bank and Asian Development Fund, whom it calls ''preferred creditors.'' It attributes the foreign exchange crunch to sanctions imposed by western countries following its nuclear tests in May this year. Reports in the local press have speculated that a delay in the next disbursement under a 1.3 billion dollar IMF package agreed to last month would wipe out Pakistan's foreign exchange reserves by Jan. 15, 1999 in view of the repayments on its debt. Dar said that the 300 million dollars due to preferred creditors would be paid by Jan. 15 and that the government was chasing every dollar that was in the pipeline. Over the past few months, a large number of exporters have delayed remission of their foreign exchange earnings in view of the expected devaluation of the Pakistani rupee. Dar has said those who fail to remit their earnings by Dec. 31, 1998 will be declared defaulters and will not be eligible to benefit from export finance and other schemes. Dar ruled out the possibility of a devaluation and the introduction of a single exchange rate in place of the current multiple exchange rate.