Pakistan Ready to Part Ways With IMF
Pakistan's decision follows the latest State Bank report of a current account surplus equivalent to 604 Million USD in the second quarter of 2011.
The surplus is the result of rising exports from Pakistan and growing remittances from Pakistani diaspora, the 7th largest in the world.
Pakistan's exports in the first two months of the current fiscal year (2011-12) surged by 20.26 percent over the corresponding period of last year. Exports during July-August (2011-12) were $4,167 million as compared to the exports of 3,465 million during July- August (2010-11, according to a GeoTV report citing data from Federal Bureau of Statistics (FBS).
According to official data as reported by Reuters, remittances rose 40.45 percent to $1.31 billion in August 2011, compared with $933.06 million in the same period last year.
Pakistan has about $18 billion in foreign exchange reserves, according to Dawn News. It's about 6 months worth of imports at the current rate.
Currency traders reacted negatively to the government's decision to part ways with the IMF as the Pakistani rupee hit its second record low against the dollar in two days on Friday, touching 87.92 before firming to 87.75/78 at the close.
Some analysts believe that the timing of the decision to free itself from the IMF is motivated by the ruling party's desire for more spending on populist programs to impress its voters before the coming elections. This is likely to make the budget deficits worse in the absence of IMF's demands for reforms to cut spending and raise revenues to narrow Pakistan's budget deficits to 4.5% of GDP.
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