Pakistan’s forex reserves rise to $11.15B, KSE rockets 24% since Dec 31st 2008

Karachi rising!

It was only back on the 30th of January that we covered the foreign exchange reserve position. At the time, the reserves stood at $10.2B and we had projected that this number would continue to rise very rapidly due to import reduction, healthy export performance and other expected inflows. Well, our projection has been borne out to quite some degree. In only 90 days, Pakistan’s foreign exchange reserve position has improved by $1B and it currently stands at $11.15B.

In addition to the progress on the forex reserve front, the Karachi Stock Exchange, Pakistan’s largest stock exchange, has also been staging a healthy recovery from the bearish trend it succumbed to during the second half of 2008. The KSE is up 24% from its Dec 31st close. And this is after a recent technical correction; the KSE actually peaked at 7,902 or a 36% increase over the Dec 31st close.

Foreign exchange inflows to Pakistan rise by 20% to $5.3B

All the major newspapers are carrying this story, but we’ll quote The News here. There has been an increase of about 20% in the foreign exchange inflows to Pakistan during July-April 2007-08 as compared to the same 10 month period during Financial Year 2006-07. These inflows include remittances by Pakistanis working abroad.

The biggest percentage jump was seen in remittances from the UAE – almost 50% up in a single year! But in general, inflows from all countries increased, including from the US, EU, Saudi Arabia and the Gulf Countries.

Included in the inflows was profit – though nominal, at about $2.2 million – on the recently issued Foreign Exchange Bearer Certificates. Tiny amount, but a good sign.

The Meteoric Rise of Pakistan’s Economy

Two interesting financial news items just appeared in the press. First, once again, foreign remittances coming into Pakistan (forex) have registered a 23.6% increase over the same period last year. Second, the KSE has continued its bullish rise to 14600 from 13100 in Nov when the PCO was passed. We have been encouraging our readers to consider investments in the KSE because we continue to believe – and our belief has been borne out to quite an extent due to this 8% increase in just under a month – that once the elections are over and the new government is installed, the KSE will register a historic high within the first two quarters of 2008.

Both these factoids just remind us of the progress that’s been made over the last few years. Take a look at where we were, and where we are:

Favourable Rs./$ exchange rate makes Pakistani IT exports even more competitive

While the US Dollar has been stressed by other currencies, including the Euro, which is at an all time high, the Pakistani Rs. has been kept relatively stable and has in fact, depreciated a little over 1 Rs. against the dollar. At a time when forex earnings are crucial, this makes Pakistani exports in general, and IT exports in particular, even more competitive. In contrast, the Indian Rs. has actually appreciated against the dollar. This is just one more reason in addition to several others – such as reduced availability of high calibre developers, increased rents and higher government taxes – that India is decreasingly attractive to buyers of software in the West. And conversely, the Pakistani industry has never been so competitive!