The data released by the state Bank of Pakistan shows 12.9 percent increase to $8 billion in foreign currency reserves. The Forex held by the private banks are $7 billion plus. But the depreciation of local currency continues against the US dollar and other foreign currencies of international trade. The surge in the foreign currency reserves of the central bank has not been achieved by increase in exports but it is driven by the receipt of first loan installment of $1 billion from the International Monetary Fund (IMF).
The inflow of dollars from multilateral donor agencies has always been turned out a bursting bubble and the downturn of foreign currency reserves starts as and when the loan programme expires. The depletion of foreign exchange reserves and currency depreciation from September 2016 and onwards is recent example. Currency devaluation or flexible exchange rate boosts exports from the economies with large and technologically advanced industrial base which produce substantial export surplus of value added goods. The economy of Pakistan has been made import based even in exportable products as the manufacturing of these products consume bulk of the imported raw material and intermediate goods which become expensive with currency devaluation.
Pakistan exports mainly include primary commodities like cotton, rice, sugar and fruits and quantum of textiles, leather goods, sports and surgical goods is small. The thrust of the economic diplomacy is on acquiring short term loans from friendly country and efforts for making new trading partners are yet to be started on which the foreign minister Shah MehmoodQureshi had dwelt at length in his address to the envoys conference. It is time to activate the redundant offices of commercial councilors and trade ministers in Pakistani embassies and diplomatic missions in the European Union, South East Asia and Africa.