Foreign exchange reserves play an important role in stabilizing the economy of any country. In the case of Pakistan, it is the American dollar, which is of utmost importance for our exports and imports. Unfortunately, the incumbent Pakistan government does not have much foreign exchange reserves due to its trade imbalance and other deficits piling upon our constrained economy.

In other words, we pay more American dollars for our imports than we receive. This phenomenon also manifests that our imports are higher than our exports, as the latter is not in a position to get the equivalent amount of dollars back into Pakistan. The piling up of import bill exerts a tremendous amount of pressure to the current account deficit.

Besides this, an alternative way to increase foreign exchanges reserves in Pakistan is remittances. In this regard, the government of the day should give maximum facilities to the overseas Pakistanis to remit back foreign exchange through the legal banking system.

Forex reserves across the world are mainly dependent upon FDI (Foreign Direct Investment). Pakistan still needs to create an investment-friendly environment that can inculcate the ease of doing business. Although the incumbent government is willing to incorporate ease of doing business environment and transparency in financial transactions, illegal means such as “Hundi” or “Hawala” still exist.

To be honest, looking at the present state of our economy, I do not see many overseas Pakistanis sending their hard earned money back to Pakistan through the proper banking system. Neither am I optimist about any foreign direct investment in the country. The only option left with Islamabad is to decrease its imports and increase its exports. Reverting to the fundamental current account deficit minimization mechanism, substituting imports for exports seems to be a fair lead for the incumbent government.

Again, if increasing exports is not possible then decreasing the imports is certainly possible by reducing our dependency on unnecessary import commodities.

All those items, which are home produced should be leverage against imported items of a similar nature. In this manner too, we can save our hard-earned American dollars.

ABDUL SAMAD SAMO,

Karachi, March 11.