Pakistan receives $688 million under CSF

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ISLAMABAD: Pakistan has at last received the much-needed $688 million under the Coalition Support Fund (CSF) from the US, confirmed Rana Asad Amin, a spokesman of the finance ministry. “This inflow will improve the reserves of the central bank and is expected to ease the pressure on the rupee,” said Amin, who credits Finance Minister Hafeez Sheikh for having persuaded the top US functionaries during his Washington visit to release the amount. “Not only will this money provide relief to the cash-starved country, it will also help check capital flight and arrest the pace of dollarisation in the country.” According to Amin, from May 2010 onwards, Pakistan had asked for $2.5 billion under the CSF but only $1.9 billion have been reimbursed. “With this latest inflow, the level of foreign reserves will rise to $14 billion,” he said. However, most analysts do not expect the inflow to have any sustained impact on the economy.

“This money may help overcome the exchange rate crisis for about a month but the balance of payments crisis will touch new high in the March-April period in 2013,” said economist and former adviser to the finance ministry Sakib Sherani. “This will, in turn, lead to further depreciation of the Pak rupee and increase inflation. By the time the fiscal year ends in June 2013, the government will have run up a huge deficit of over eight percent.”

Similarly, noted economist Dr Ashfaque H Khan predicts the exchange rate will continue to remain under tremendous pressure and will soon enter the three-digit frame, which will trigger inflationary pressures.

“These will contribute substantially to the growth of public debt,” said Khan. “The country’s foreign reserves have now fallen to $13.374 billion. Of this, the State Bank has $8.514 billion and commercial banks hold $4.860 billion. The government can only utilise the reserves held by the State Bank.”

The US government releases money under the CSF to Pakistan for military expenditures incurred by the latter in the war against terrorism and to reimburse Islamabad for facilities provided to the coalition forces.

The clearance of these bills is a 10-step procedure: Islamabad sends its claims to a US military brigadier in the US embassy who reconciles these bills and then sends them to the Pentagon for clearance. After the US Congress approves of the same, the amount is transferred into the government’s account at the State Bank of Pakistan. Since 2001, the US has reimbursed $8.654 billion to Pakistan (excluding Friday’s payout). During the last 10 years, the US has reimbursed Pakistan for 60-65 percent of its total claims.

 

Courtesy: The News


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