By Shahbaz
Rana
The Express Tribune
Karachi, Pakistan
Saturday, March 29, 2014
http://tribune.com.pk/story/688588/turn-down-pakistan-refuses-to-sell-go...
ISLAMABAD, Pakistan -- Pakistan has refused to sell gold worth $2.7 billion,
citing national security reasons, as the International Monetary Fund pushes
Islamabad to convert the precious metal into cash to build foreign currency
reserves, the global lender's report revealed Friday.
The report, prepared by
IMF staff led by its Washington-based mission chief to Islamabad, Jeffrey
Franks, also spills the beans on the "$1.5 billion gift" to
Pakistan by "Saudi Arabia" -- the name Prime Minister Nawaz
Sharif's government has so far refused to officially share with parliament.
According to the report,
the State Bank of Pakistan holds more than 2 million troy ounces of monetary
gold, having $2.7 billion of value at the market rate. It is not counted in
gross international reserves as it is not deemed to be liquid by the State
Bank of Pakistan, the IMF says.
The IMF and Pakistan authorities discussed what
steps would be needed to make the gold more liquid, the report adds.
"However, the (Pakistani) authorities stressed that they have no plans
to sell gold and preferred existing arrangements for gold holdings for
national security reasons."
The IMF is pushing
Pakistan to sell gold holdings at a time when other countries are buying the
commodity as a strategic reserve. The IMF had even sold its surplus gold to
India a couple of years ago.
According to analysts,
one reason behind the IMF's insistence could be the country's inability to
build official foreign currency reserves despite being in the $6.7 billion
IMF arrangement.
While the IMF hinted in
its report that the State Bank of Pakistan was not aggressive in building
foreign currency reserves, it disclosed that Pakistan's central bank
continued its efforts to build reserves by purchasing dollars from the
market.
The State Bank of
Pakistan purchased $575 million in the last few months till March 17, the
report states. The purchases may help stabilise the
foreign currency reserves but are considered one of the reasons behind
depreciation of the local currency against the US dollar. The rupee started
appreciating only after the $1.5 billion grant from Saudi Arabia.
While the federal
government remains reluctant to officially disclose the name of the country
that "gifted" Pakistan $1.5 billion, despite the persistent demand
of the opposition, the IMF report identifies it as Saudi Arabia.
A "$750 million
grant recently received from Saudi Arabia" will help the Pakistani
government in reducing borrowings from the State Bank of Pakistan for budget
financing, the IMF said.
"Reserve
accumulation was also aided by an additional inflow of $750 million from
Saudi Arabia," according to Memorandum of Economic and Financial
Policies, which is attached with the report and is jointly prepared by
Pakistan and the IMF.
In a footnote to the
memorandum, Pakistan told the IMF that it received an initial inflow of $750
million on February 19, indicating that it would receive more money.
The IMF confirmed its
recent forecast of 3.1 per cent growth this year, which was revised up from
an earlier 2.8 per cent. "The overall economic situation in Pakistan is
gradually improving," said Jeffrey Franks.
"That 3.1 per cent
may still be a bit on the conservative side, so we see indicators of growth
that are relatively strong considering the fiscal adjustment that has taken
place," he told reporters on a conference call.
For the 2014-15 fiscal year, the IMF expected Pakistan's growth to accelerate to
around 3.7 percent.
The IMF report said the
growth was boosted by a stronger manufacturing industry thanks to an easing
of Pakistan's chronic electricity shortages, despite weaknesses in
agriculture.
It also said that Prime Minister Nawaz Sharif's government, despite its
commitment to IMF-backed reforms, faced "strong" political
resistance to certain structural measures.
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