KARACHI: The country’s foreign exchange reserves rose to an all-time high of $21.319 billion, State Bank of Pakistan reported on Thursday.
The main increase was in the central bank’s holdings which shot up to $16.517bn for the first time. However, the holdings of scheduled banks remained almost unchanged at $4.8bn.
The country has been enjoying high level of foreign exchange reserves for more than a year which helped the government achieve stable exchange rate and strengthen local currency.
The fear of defaults is not being discussed these days but a number of independent experts said the cost of achieving this level of foreign exchange reserves is too high. They said most of the dollars in the country’s account are borrowed which are bound to be paid back with interest.
The burden of interest is so high that it forces the government to borrow more to pay back old debts which means old debts are changed with new one with added cost.
The country paid over $5bn as debt servicing in FY15 while in FY14, the debt servicing cost the country about $6.9bn.
Experts believe the cost of debt servicing could be more than $8b in FY16 due to end of rescheduled period of Paris Consortium debts.
The State Bank reported an addition of $485 million in the total reserves this week. On May 12, the IMF in Dubai said it would release $510m to the country as part of a three-year, $6.7bn financial assistance programme.