Pak looks to expatriates, China for FOREX help

To stave off a potential foreign exchange crisis, Pakistan is reportedly planning to raise hundreds of millions of dollars from Pakistani expatriates and wealthy Chinese investors.

According to a Financial Times report, Islamabad's foreign currency stocks have reduced this month to about USD 11.4 billion, which is equivalent to about ten weeks of imports, and down from around USD 14.1 billion in December.

The Financial Times further states that falling remittances from Pakistani migrant workers abroad and rising imports and payments to Chinese companies for infrastructure as part of an ambitious, USD 60 billion China-Pakistan Economic Corridor (CPEC) is primarily responsible for this drop in foreign exchange reserves.

Pakistan needs to raise USD 17 billion to cover its debt repayments and current account deficit (CAD) this year. This warning was issued by the World Bank in October last year.

"Our expatriates will be offered attractive rates, better than what they will receive elsewhere," The FT quoted an official of the State Bank of Pakistan, as saying this week. He said Pakistan would seek to raise up to USD one billion from expatriates worldwide, but did not reveal terms of the offer.

A senior official in Islamabad said that other options include borrowing from Middle Eastern countries or from Chinese commercial banks.

Miftah Ismail, Pakistan's de facto finance minister, had told the FT that the country was also seeking to issue debt denominated in Renminbi for the first time.

Last year, Islamabad had borrowed more than USD one billion from Chinese state-backed institutions as its CAD worsened, triggering fears that Pakistan was becoming overly dependent on the support of Beijing.

Pakistan is yet to decide on the amount it wants to raise.