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August 15, 1999

  1. International
  2. Finance
  3. Industry
  4. Policy
  5. Trade

NBP earns

National Bank of Pakistan (NBP) has attained capital adequacy of 11.3% and earned pre-tax profit of Rs2.135bn in the year ending December '98, showing an increase of 100% over the previous year.

SBP accepts bids

The State Bank of Pakistan (SBP) Wednesday mopped up Rs 15,569 million with the sale of market treasury bills (MTBs) of various tenures.

The SBP accepted bids for bills with 3 months and 12 months maturity periods and rejected bids with 6 months tenures.

The cut off yield was calculated at 6.9% and 10.3 per cent for 3 and 12 months bills.

Central Bank had received total bids worth Rs 50,415 million.

Direct investment from Japan goes up

Foreign direct investment (FDI) from Japan soared by over 200 per cent to $57 million despite a sharp decline in the FDI inflow during the fiscal year 1998-99.

Pakistan attracted FDI of $376 million in the previous fiscal year, a drop of around 37 per cent, when compared with the FDI inflow of $601.3 million in the year 1997-98, according to sources in the State Bank of Pakistan.

The portfolio investment also registered a sharp decline to $27.3 million in 1998-99 as against $221.3 million in 1997-98.

ICI Pakistan loss

The Board of Directors of ICI Pakistan Ltd. which met in Karachi on Tuesday announced that the company had posted Rs 2,465m in pretax loss for the first six months (Jan-June 1999). This replaced profit of Rs 333m earned in the corresponding period of the previous year. The board also announced that an interim dividend for the current year was being skipped.

Adjustments after discussions with IMF

The details of the credit plan for 1999-2000 would be finalized after discussions with the IMF review mission due in Pakistan any time this month.

Sources close to the ministry of finance say though the plan has been approved by the board of directors of the State Bank at its meeting held on August 7 in Lahore, its specifics are yet to be finalized.

The SBP in a press release issued on August 7 that the credit plan 1999-2000 included Rs 119 billion allocation "for financing of the productive private sector economic activity."

The release did not say how much of this amount would go to the private sector proper and how much would be spent on the public sector commercial enterprises (PSCEs).

Forward cover fee cut to 8pc on $

The State Bank on Monday cut the forward cover fee from 10 to 8 per cent on US dollar and from 9.75 to 8.15 per cent on pound sterling.

It also lowered the fee from 12 to 10.60 per cent on Deutsche mark and from 14.80 to 13.50 per cent on the Japanese yen.

The SBP said in a letter issued to all banks that the fee had been lowered with the move towards market-based exchange rate system and anticipated relative stability in the exchange rate."

It said the decision which would be effective from August 9 would not apply on the foreign currency deposits raised under F.E. 45—the scheme under which foreign currency swap funds are raised by the banks from abroad.

The letter explained that the gradual increase in forward cover rates were made in the past to contain the rising level of losses to the SBP due to forward cover on rapid depreciation of exchange rate. SBP had last raised the forward cover fees on March 4,1999.

In 1997-98, SBP had incurred a loss of around Rs 13.8 billion on the forward exchange risk cover it had provided on foreign currency accounts. This had wiped off about a one third of its total earning of Rs 42.12 billion during the same year. Figures for fiscal 1998-99 are not available but top bankers close to SBP say the SBP may have either suffered a minimal loss or made a little profit instead on its forward cover business in the last fiscal year.

SBP provides exchange risk cover on foreign currency accounts on a predetermined rate for a specific period. Suffering loss in this business means that the SBP realized lesser amounts through forward cover fee than the losses it booked due to exchange rate depreciation.

Glaxo Wellcome

Glaxo Wellcome Pakistan Limited unveiled after tax profit at Rs 188.7 million for the first six months to end-June 1999- a 1.3 per cent increase over earnings amounting to Rs 186.4 million for the corresponding period of the previous year. The Board of directors, which met on Monday, also declared interim cash dividend at 20 per cent.

Hubco, PSO to be worst hit

The tax on reserves clamped by the government through the Finance Act has the potential of breathing fire into the smoulders of the ongoing Government-Hubco row, as the private power producer, could be obliged to pay the second highest sum in penalty among corporates.

With the Hub Power Company having built-up revenue reserves that equal nearly 87 per cent of its paid-up capital of Rs 11.6 billion this troubled IPP would have to pay a whooping sum of Rs 426.2 million in additional tax, brokerage firm, Taurus Securities Limited has calculated.

The amount would be the largest sum in such penalty to be paid by any company, after PSO; the public sector oil marketing company would be slapped with the additional tax burden of Rs 509.7 million, on its reserves of Rs 5.6 billion, which work out to 56 per cent of the blue chip's capital of Rs 6.6 billion

Commercial borrowing drying up

The rescheduling of Pakistan's commercial debt has made it almost impossible for Pakistan to tap into this important source to finance its persistent current account deficit in years to come.

" In fact for the last four or five years, Pakistan was maintaining $ 500-750 million debt stock under these arrangements as outflows were being matched by new borrowing," said a lender.

But with the freezing of foreign currency accounts and rescheduling of commercial debt, most of these inflows have dried up and financial experts foresee a very tight balance of payment position after December 2000 when Pakistan would start servicing its debt.