KARACHI, Oct 11: People including foreigners have withdrawn $59 million from foreign currency accounts within a month after the September 11 terrorist attacks on New York and Washington.

This is evident from the fact that foreign exchange reserves held by the banks fell from about $1.637 billion on September 8 to $1.578 billion on October 6.

Senior bankers say the fall in the reserves largely reflects the withdrawals people have made from their foreign currency accounts.

Bank treasurers say many foreigners have repatriated abroad millions of dollars. They say local people have also taken out huge amounts of money from their foreign currency accounts.

Immediately after the September 11 many individual foreigners and firms operating in Pakistan transferred abroad millions of dollars from foreign currency accounts.

The security risk has made the foreigners nervous. Bulk of corporate executives have left Pakistan.

The local depositors also turned panicky and started making heavy withdrawals from foreign currency accounts, fearing freezing of these accounts. Pakistan had frozen $11 billion foreign currency deposits in May 1998 after going nuclear.

President Pervez Musharraf quickly issued an ordinance that guarantees that no government can freeze the foreign currency deposits. The SBP is yet to frame rules to give effect to the promises made in the ordinance. Bankers say withdrawals still continue.

“The withdrawals would have stopped had the US not launched retaliatory air attacks on Afghanistan,” said a senior banker.

Bankers say more withdrawals are taking place after the US attacks on Afghanistan, but they cannot quantify them as final figures are yet to pour in.

They say foreigners based in Karachi and Islamabad are not only transferring money abroad but they are also holding cash.

They say most of the withdrawals by local people are being reported from bank branches in Quetta, Peshawar and Islamabad.

Perceptions differ on where on earth people are keeping the foreign currencies they take out from banks but one thing is obvious: There are people who are selling foreign currencies in the open market to get rupees. That is why the rupee has risen from 67 per US dollar on Sept 11 to 63.70 on Oct 11 in the kerb.

But why people are holding cash rupees? Some bankers say the public holds cash whenever there is an uncertainty. “Further we should not forget that pro-Taliban forces in Pakistan also need cash,” said treasurer of a leading bank. Other bankers contacted by Dawn also endorsed this view. Some of them said that the US intelligence agencies may also be using local currency to tame tribal supporters of Taliban.

Bankers say in addition to unusual withdrawals and transfers, there is another reason for the decline in the foreign exchange reserves held by the banks.

“After the removal of the Nostro limits last month, banks are utilizing their Nostro accounts more frequently than in the past to make commercial payments on behalf of their customers,” said treasurer of a leading bank.

This means that banks are paying for the importers on the one hand and buying forward dollars from the exporters on the other thus draining out their foreign exchange reserves.

GROSS RESERVES: The $1.578 billion forex reserves held by the banks as on October 6 was part of Pakistan’s gross liquid reserves of $3.328 billion. The remaining $1.750 billion was held by the State Bank. The SBP reserves show a buildup of $10 million if compared with the reserves it had on September 8.