Thursday, July 30, 2009

Pakistan's Forex Reserves Rise To $11.15B

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.

Through slightly more subjective information gathering, we’ve also determined that the real estate market is showing signs of very strong acceleration once again. While the mortgage crisis never really hit Pakistan since much of the privately owned property is owned outright, demand had receded somewhat through the second half of 2008. This is, however, no longer the case. The property business is picking up in a healthy way in Lahore and Islamabad, and prices are continuing to rise. One benchmark that we obtained specific information on is the price of plots in Lake City. A reference home that was available for Rs. 13.4M 18 months ago is now priced at Rs. 16M, showing 12% appreciation in just a year and a half. As compared to most international property markets, this is phenomenal growth, even if it is slow by historic Pakistani standards.

With the recent 1% cut in the State Bank’s interest rates, credit is on its way to becoming cheaper. There is still lots of room to go, but easing the rate certainly indicates that the inflationary threat is receding.

Overall, this news bodes very well for Pakistan’s economy. There is a lot more to look forward to. Within the next 9 months the new power generation capacity coming online will positively affect manufacturing outputs and exports. In fact, extrapolating from year to date performance, Pakistan’s trade gap is sure to shrink, foreign inflows will increase even beyond optimistic projections made a few months ago, credit will be more readily available and the KSE and real estate market will demonstrate strong growth. Stay tuned!
Tagged with: Foreign Exchange, forex, karachi stock exchange, KSE, lake city, Pakistan economy, pakistan economy 2009, pakistan economy growth, pakistan forex reserves, pakistan real estate, pakistan reserves, pakistan stocks

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