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Given the declining flow of official remittances, If SBP
had not started this unorthodox practice, Pakistan's current account deficit would have
been US$ 2.8 and US$ 2.6 billion for the years FY99 and FY00, respectively Although still
lower than the external gap posted in FY96 and FY97, given Pakistan's inability to borrow
from most external sources, the suspension of assistance from the IFIs during FY00 and the
sharp increase in the price of oil, the gap without outright purchases would not have been
financeable. This implies that in the absence of outright purchases, there would have been
tremendous pressure to contain imports, service payments, and individual demand for hard
currency for travel, health and education abroad.
