IMF against dollar buying
from kerb market
The International Monetary Fund (IMF) has asked the government to shift
its dollar purchases from unofficial to interbank market, well-placed sources said.
According to an official estimate, so far, the government has purchased
over $1.2 billion from money changers operating through Pakistan and Middle Eastern's
rupee convertible markets.
Sources say this amount may go up to $1.6 billion by the end of current
This shift of business may lead to an effective depreciation of the
rupee as the pressure on the interbank market will increase.
Since the beginning of current fiscal, Pakistan has financed a large
portion of its dollar needs by buying from the kerb market. These purchases have helped to
finance its trade deficit without multilateral aid and to prop up foreign exchange
reserves, now over $1.5 billion.
"They (IMF) think this is against the spirit of reforms introduced
after exchange rates unification according to which, all transactions should be made
through the interbank market," a source said.
Exporters sell their dollar proceeds in the interbank market, which
fulfils the demand created by imports, profit and dividend repatriations.
The dollar supply in the unofficial or kerb market comes through dollar
inflows from unofficial channels.
The Fund also thinks that differential between the interbank and kerb
market is also higher, which may be brought down by easing demand off the unofficial
market and shifting this to the interbank market.
A big differential between the two, economists say, may trigger dollar
inflows from interbank to the kerb market, depriving the government from foreign exchange
it badly needs.
Overseas Pakistanis sent $678 million back home in the first nine
months of this fiscal year against $656 million in a year-ago period, sources in Ministry
of Finance say.
On the face of it the $22 million increase in foreign exchange inflow
is quite nominal but it indicates a change for the better.
"Overseas Pakistanis are willing to send in more money through
banks," says head of marketing division of a state-run bank. "But banks need to
cut the time taken in the delivery of remittances if they want people to use banking
channels to send more foreign exchange."
State-run as well as private banks claim to have minimised the time
taken in the delivery of remittances to 24 hours for cities and 48 hours for rural areas
but complaints keep pouring in at the banks about inordinate delays: in some cases home
remittances take as much as a week to reach the destination even in cities.
Forex reserves at $1.479bn
Gross liquid foreign exchange reserves stood around $1.479m on April
15. The latest State Bank statement released on Thursday puts total approved foreign
exchange reserves at $1.180bn and balances held abroad in cash and short term securities
The gross forex reserves include more than $300m worth of foreign
currency deposits of banks placed with the State Bank. Thus net forex reserves stood below
$1.2bn on April 15.
SBP cuts yield
The State Bank slashed average yield on treasury bills of different
tenures by 7-14 basis points sending a signal to all banks that they should lend
more to the private sector. This is the second rate cut within a fortnight: the first one
on April 5 had sent average yields on T-bills down by 17-25 basis points.
The SBP sold Rs4.85 billion worth of T-bills to raise short-term debt
for the government from the interbank market. It sold Rs3.85 billion worth of six-month
T-bills at a weighted average yield of 7.12 per cent and Rs500 million worth of bills each
for three-months and one-year at 6.97 and 7.59 per cent.
Government to earn $200m by offloading nine entities
The government is likely to earn $ 200 million through the
privatization of nine entities by the end of the current financial year, which includes 49
per cent shares of Allied Bank Limited (ABL), official sources told.
This is a part of government's short term privatization plan, already
approved by the Cabinet Committee on Privatization (CCOP) and it will soon go into
implementation, they said. After clearly chalking out a three phased plan, the
Privatization Commission (PC) is totally focused on the short term transaction proposals.
Accord with Japan
Pakistan and Japan are scheduled to sign $ 814 million debt accord next
week which will complete the process of rescheduling Islamabad negotiated with the
creditors of the Paris Club.
"There is only a procedural delay as both the sides have completed
the negotiations on the consolidation and rescheduling of debt," official sources
said here on Monday.
Under the agreement signed with Paris Club in January, 1999 Pakistan
secured the debt rescheduling of $3.3 billion from the 18 creditor countries over a period
of 20 years.
Pakistan was, however, required to sign bilateral agreements with all
the creditors by December 31, 2000. The date was further extended by three month, later.
SBP earns Rs200m on forex cover
The State Bank has earned more than Rs 200 million profit on exchange
risk cover in the first nine months of this fiscal year: in the previous year it had
incurred a loss of Rs 13 billion.
Senior bankers close to the SBP say what has turned the tables is a
stable exchange rate: On July 1,1999 the rupee traded around 51.70 to a US dollar in the
inter-bank market. The rate saw very little change in the next nine monthsRs 51.90
at the maximum.