India recorded a lifetime high when foreign exchange reserve touched USD 426.42 billion post-surge by USD 4.215 billion in the week to June 21, RBI data suggested.
Indian Forex reserves had last scaled a monumental high of USD 426.028 billion in the week to April 13, 2018. The upscale in reserves was due to an increase in foreign currency asset, a major component of the overall foreign exchange reserves.
In the following week, foreign currency assets increased by USD 4.202 billion to USD 398.649 billion. In terms of US dollars, foreign currency assets are said to involve the impact of appreciation/depreciation of non-US currencies like the euro, pound and yen held in the reserves.
Gold reserves remained unchanged at USD 22.958 billion, said RBI data. The notable change is the Special Drawing Rights with the International Monetary Fund (IMF) which has increased by USD 4.2 million to USD 1.453 billion.
The country’s reserve position with the fund also rose by USD 9.6 million to USD 3.354 billion.
The situation has not been all that rosy across the border with the Pakistani rupees plummeting into the lowest ever. The principal loan from the IMF was not able to hold the currency from its uncontrolled fall. Pakistan’s stock market also declined on Friday, with the benchmark KSE 100 index down 2.4 per cent by 0615 GMT. A market-determined approach by the IMF based on “demand and supply of foreign exchange market” would help bolster the present predicament.
The Khan-led Pakistan government is looking at raised taxes or imposing heavy spending cuts to reduce its ballooning budget deficit at a time when household budgets are increasingly squeezed. Pakistan’s economy is undergoing a common boom-and-bust cycle; debt is soaring, inflation is rocketing, and reserves are falling after a deficit blowout. The IMF has long advocated Pakistan to loosen its grip on the rupee and estimated the real exchange rate was overvalued by as much as 20 per cent in 2017.
Pakistan is now seeing a new wave of tranche from allies with Qatar having 500 million USD, Saudi Arabia and the United Arab Emirates (UAE) pledging aid packages for Pakistan. Riyadh has provided a $3 billion loan while the UAE provided $1 billion. China too had previously flushed the Pakistan market with 2.2 billion USD in forex reserves.