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Sep 20, 1999

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

Forex business shrinks

The volume of foreign exchange transactions in the inter-bank market has fallen sharply after the State Bank put some restrictions in the wake of the rupee float on May 18.

The fall in forex transactions cannot be quantified for want of official figures but senior bankers say foreign exchange business has fallen to an average of $30-$50 million daily from $200-$250 million before May 18, 1999.

Paris Club allows Pakistan to pay Eurobond dues

Pakistan has paid principal amount of $17.5 million to two Middle Eastern banks to avoid being first rated sovereign to default on Eurobonds.

"We got a one-time permission from the Paris Club to pay two Middle Eastern banks, who were holding this amount in put options. This was an attempt to avoid being a first bad guy in the international market as after this payment Russian maturities were falling ahead of Pakistan," a source said.

Well-placed sources said Pakistan had made these payments on June 21 fell due on Citibank's $150 million bond issue.

But Pakistan could still be the first to default on these bonds as Russia was later exempted from bond rescheduling due to its nuclear muscles. Pakistan's first bond issue is maturing on December, 1999.

Pakistan paid $7.5 million in principal amount to Gulf International Bank and $10 million to Abu Dhabi Investment Agency. Put option is a right under which a bond-holder can ask for redemption before the actual maturity of the bond.

The Paris Club of sovereign lenders told Pakistan earlier this year that it must effectively default on $470 million Eurobonds falling due by December 2000 before it would approve a deal to reschedule a bilateral loans.

But Pakistan showed some reluctance and continued to pay coupon payments on these bonds until Paris Club devised a mechanism how to reschedule these instruments.

Pakistan has two floating rate notes (FRNs) and two sovereign bonds, totalling over $600 million, of which $470 million will mature by December 2000.

According to reports, there has been understanding reached with the Paris Club that Pakistan would reschedule these bonds in a manner that principal payments were staggered.

Sources, however, said Pakistan's agreement with the London Club of creditors prohibited it to give a better deal to bond-holders.

Canada keen to invest

Canada takes much interest in rapid industrial and commercial development of Pakistan and hopes certain conditions will be created by Pakistan in public and private sectors for this very purpose.

Richard Bale said Pakistan had bright prospects of pulling in foreign investment in various sectors of economy, because of its ideal location for thriving trade, commerce and industry.

'Fresh disturbances may discourage investment'

The Korean envoy Yoon Jee Joon said, that inconsistency in the economic policies had been the main reason for the lack of interest of the Korean and other foreign investors to invest in Pakistan.

While appreciating the policies pursued by the government for attracting foreign investors, he underlined the need for bringing a change in the perception of the foreign investors which the envoy felt matters the most rather than the realities on the ground.

Bank asked not to act as puppets

The Governor, State Bank of Pakistan (SBP), Dr. Muhammed Yaqub on Saturday asked the board members of all the five banks in public sector to play active role and monitor the performance of the management.

"You should not act as rubber stamp to the bank's management," he said while addressing the board members of HBL, UBL, NBP, ABL and partially privatised MCB at the SBP.

The meeting with the board members follows a big fraud committed allegedly by the management of Bankers' Equity Ltd (BEL) and news reports that management of various banks have been asked to support the Prime Minister's Housing Scheme by extending sufficient credit.

The SBP Governor had similar meeting with the heads of all banks 10-day back and they were asked to adhere to the prudential regulations for banking system.

Farm credit

The agriculture credit for Kharif crops during April-June, 1999 totalled Rs 12.19 billion showing 25 percent increase over the same period last year, sources at the Agriculture Ministry said on Saturday.

The disbursement during April-June 1998 (Kharif crops) was to the tune of Rs. 9.70 billion.


The Crescent Business Management (Pvt) Limited, the managers of First Crescent Modaraba proposes to merge the Modaraba with their recent acquisition: The Al-Ata Leasing Modaraba.

Unilateral levy

Citibank has arbitrarily imposed a transaction processing fee at the rate of 1.60 percent on the value of all transactions made by their Citibank Visa Card holders from August 1999 onwards.

The billing statements issued in September for transactions made in August contain this levy. When contacted, the Citibank Card representative informed Business Recorder that this unilateral levy was not imposed by Citibank alone but in concert by all banks that market credit cards in Pakistan.