Some Pakistanis take money out of banks amid economic crisis

October 11th, 2008 - 12:55 pm ICT by IANS  

Pervez MusharrafIslamabad, Oct 11 (IANS) Some Pakistanis have started cleaning out their bank lockers and dollar accounts, fearing a freeze due to the economic crisis gripping the country. The run continues despite the assertion of President Asif Ali Zardari that “Pakistan is not a limited company which may go bankrupt”.The declining value of the Pakistani rupee against the US dollar and other international currencies, the fall in foreign exchange reserves, the worsening situation in the country’s stock markets and the overall economy, rising inflation and increasing terrorism have badly shattered investors’ confidence, with some looking for other options.

This has also led to rumours that the government may freeze foreign currency accounts and bank lockers of individuals. But the State Bank of Pakistan (SBP) and Shaukat Tareen, newly appointed adviser to the prime minister on finance, have strongly contradicted these reports.

“We are in difficult times, but the rumours about freezing foreign currency accounts are baseless and this will never happen,” Tareen, an experienced banker, told reporters Friday.

Speaking at the launch of the Rs.34 billion Benazir Income Support Programme (BISP) here, Zardari said: “Pakistan is not a limited company which may go bankrupt”.

He said that the people should trust the government and though the country was facing a crisis, there was no plan to freeze the foreign currency (FC) accounts or the lockers.

The foreign exchange reserves of Pakistan have gone down to $8.32 billion from a historic high of $14.46 billion in October last year.

Analysts say the massive decline in overall national reserves is due to economic weaknesses, political chaos and the deteriorating law and order situation. But leading economist Talib Hussain attributes it to the end of artificial economic measures by the previous dictatorial regime of former president Pervez Musharraf.

The Pakistani rupee is now at 79.5 to 1 US dollar from Rs.60 before the democratic government took over in March this year while the benchmark KSE-100 index in country’s leading stock market has gone down to 9,181 from 14,820 in March this year.

Inflation is at an all-time high with the basic commodity index rising 26 percent.

The increasing terrorism that has taken more than 1,200 lives since the new government took over in March has also badly affected confidence all around, with the common man, particularly pensioners, more worried.

However, bank officials say that many people have started withdrawing dollars from their accounts and have emptied their lockers fearing the government may take control of these because of the financial crunch.

It was in May 1998 when the then government after the nuclear tests announced freezing of FC accounts and people were not allowed to withdraw dollars but were given rupees instead at the official conversion rates instead of dollars.

People have also not forgotten the nationalisation process of the 1970s when the Pakistan Peoples Party (PPP) government had taken over every private factory, schools, banks and other organisations and the owners were made to walk out empty-handed.

“I still remember when I was pushed out of my own factory which my father had developed in 30 years and I know how I again rebuilt my business… I am afraid that the PPP government may take over it again in the name of nationalisation,” says a leading businessman of Islamabad, requesting anonymity.

He said that he has no plans to leave the country or shift his business outside Pakistan but “I know there are people who have started shifting their businesses and money to other countries”.

Businessmen expressed the fear that any such step to freeze FC accounts or bank lockers may create “chaos” in the country. A banker in Islamabad said that half of the FC accounts in his branch have been closed and people have withdrawn all their money.

Despite these rumours and fears there are many who are positive of a turnaround in the next six months. Asim Sajjad, a young entrepreneur, says that the business community should stand by the government in these hard times rather than create panic.

He is of the view that what the businessmen have earned from this country should not be shifted outside. He says this is the time when the business community should come forward to help the country as Pakistan is not the only one facing an economic crunch; rather it is an international economic crisis that is being also felt in Pakistan.

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