LAHORE: As Pakistan's finance managers began crucial talks on its Economic Stabilization Programme with the International Monetary Fund (IMF) on Tuesday in Dubai, most commercial banks back home had already run out of dollars in hard cash. While some banks were straight forward in "informing' their customers that they couldn't withdraw hard cash from their foreign currency accounts for at least another one week, others offered to encash cheques worth up to only a few hundred dollars.
"I needed $3,000 in cash for traveling abroad. But my bank told me that it did not have dollars to give me when I presented my cheque to the teller this morning,' a man, who is maintaining foreign currency account with the National Bank of Pakistan's main branch on The Mall in Lahore for more than two decades, told Dawn.
"I don't know what to do now because the bank has asked me to wait for at least one week before it could arrange dollars,' the man, who is scheduled to take his flight this week, said.
An NBP executive from its main branch confirmed that the bank was refusing to encash foreign currency cheques because it did not have dollars. But, NBP main branch chief manager Shahid Majeed told this reporter, "there's no problem in transferring money from Pakistan to any destination around the globe. The foreign currency accounts are safe and fully funded. The account holders have no need to panic. It is just that we have run out of cash in the recent days because the increasing gap between the inter-bank and open market exchange rate. Our head-office in Karachi is trying to arrange dollars from Dubai , at a better rate, but that will take another few days to one week.'
An executive of the Askari Bank, who asked not to be identified because he is not authorized to speak to the media, told Dawn that his bank did have "some dollars' in hard cash. "But we are asking our customers not to withdraw cash unless they needed it direly. We are encouraging our customers to write smaller cheques so that nobody goes back home without some dollars in his pocket,' he said, smiling.
The Askari banker said the foreign banks "might be holding more dollars than local banks. But there is an overall shortage of dollars in hard cash in the banking system.'
Pakistan's net foreign currency reserves have plunged to $7.749 billion , with banks holding $3.414 billion , to October 16 from $16.4 billion a year ago. The foreign reserves held by the State Bank have dwindled 74 per cent to $4.335 billion, barely enough to cover six to eight weeks of imports, over the last one year.
The depleting foreign reserves and widening current account deficit made the rupee slump to all-time record low last week, and triggered fears that the country may default on its foreign debt obligations when these mature early next year.
The IMF, whose officials will encourage Islamabad to join its programme during the ongoing crucial talks, says Pakistan needs as much as $10 billion from donors over the next two years to avert default on its debts.
The Prime Minister's advisor on Finance Shaukat Tareen has already hinted at the possibility of making a formal request to the IMF for help if the country failed to raise loans from other sources. The refusal of multilateral lenders and the 15-member Friends of Pakistan Group, which was formed in New York last month and is due to meet in Abu Dhabi next month, to give cash advance is likely to push the country into another IMF programme, the first since it came off its previous $1.3 billion programme in 2004.
