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Jun 19 - 25, 2000

SBP buys $ from inter-bank market

The State Bank on Monday sucked in some $60- $65 million in one-month swap from banks to prop up the foreign exchange reserves and inject local currency funds into liquidity starved money market.

Net liquid foreign exchange reserves have fallen to about $900 million. The inter-bank money market is so short of liquidity that call rates have remained almost pegged at 10.90 per cent in past two weeks with banks borrowing up to 10 billion of rupees from the State Bank as a routine to cover their daily positions.

Bankers said the SBP entered into one-month rupee/dollar with half a dozen foreign and local private banks. They said the SBP struck the deals with the banks at a premium of five paisa over the spot price of the US dollar—or 1.14 per cent.

Bankers said three European banks and some private local banks provided dollars to the State Bank against rupees out of their fresh foreign currency (F.E. 25) deposits mobilized before June 3,1999. Banks have already placed with the SBP more than $300 million worth of such deposits raised afterwards.

Bankers say total fresh foreign currency deposits of the banks—including $65-$65 million swapped on Monday— stand over $500 million.

The SBP made no official statement. Sources close to the SBP would not say whether the swap would be a permanent feature. But bankers said the SBP was likely to continue this practice off and on.

They said so because they felt that intermittent swaps would best help the central bank in meeting all external liabilities in the weeks to come without any funds flowing in from IMF or World Bank.

Govt borrowed $500m from ARY gold

Pakistan has borrowed nearly as much as 500 million dollars from Dubai based gold trading company ARY under swap arrangement in the last ten years.

Islamabad still owes nearly 200 million dollars to this company as the swap under which this amount was borrowed will extend up to 2003.

In a series of letters sent to the Chief Executive, General Pervez Musharraf, the chief executive and managing director of ARY, Haji Abdul Razzak has claimed that he has also invested more than 50 million dollars in various industrial projects in Pakistan.

In another letter to Finance Minister Shaukat Aziz, he had offered to sponsor a scheme to promote home remittances.

His proposed scheme has two elements: 1. Rationalize the exchange rate (to Rs. 54 to a dollar buying and Rs. 54.40 to a dollar selling from the present Rs. 51.40 to a dollar buying and Rs. 51.90 selling). 2. One company in collaboration with some security management firm be authroized to collect all home remittances and then send the amount to Pakistan for onward delivery at the door steps of beneficiaries all over the country.

Ishrat says time not right for adjustment

Pakistan's central bank said on Thursday that the rupee was under pressure from the weakness of its Indian counterpart but added the time was not right for an adjustment, dashing market speculation of a devaluation soon.

State Bank of Pakistan Governor Ishrat Hussain also told that the International Monetary Fund, which is discussing a loan programme for Pakistan, had not asked for a devaluation.

"So far, until the Indian rupee came under pressure, we were doing all right but since the Indian rupee has undergone some depreciation, we are under pressure," he said.

The Indian rupee has lost 2.5 per cent of its value since early May, while Pakistan's central bank allowed a 0.38 per cent downward adjustment of the rupee in the interbank market last month.

The change barely checked a huge demand by Pakistani importers for forward booking while exporters withheld $250 million in export proceeds in the hope of a further devaluation.

Banks to open internet accounts

The State Bank on Thursday allowed banks to open Internet Merchant Accounts to regularise the activities of business houses already engaged in e-commerce and to bring others into this fold.

A SBP circular (F.E. 6) says internet merchant accounts can be opened either in local currency or in US dollar. It says that those desiring to open these accounts will have to submit a copy of their national tax number (NTN) certificates to their bank.

Credit rating for banks, NBFIs

The State Bank has made it mandatory for all financial institutions including banks to have themselves credit rated by June 30. Previously only nonbank financial institutions were required to seek credit ratings.

An SBP circular issued recently said the decision was aimed at safeguarding the interest of prospective investors/depositors and creditors. It said only those credit rating companies that are on SBP panel could assign ratings to financial institutions.

T-bills

The government on Wednesday borrowed one billion rupees from the inter-bank market through sale of treasury bills.

The State Bank sold T-bills of three months to maturity at 6.93 per cent. The auction of the bills had attracted total bids worth Rs6.8 billion of which the SBP accepted bids worth one billion rupees and rejected the rest.

Pakistan to pay $31.16m on bonds rescheduling

Pakistan will pay $31.16 million as its first coupon payments on Pakistan bonds worth $623 million on Tuesday rescheduled as part of understanding with the Paris Club and the International Monetary Fund (IMF) last year.

The country on November 15, 1999 asked its investors to exchange three bonds maturing over the next three years for new securities that will expire in six years (2005). The new bond would be Pakistan Bond' with fixed return of 10 per cent per annum.

The bond was issued on December 13 and its new worth was $623 million from the previous value of $610 million. The three bonds converted were Eurobonds worth $300 million, Pakistan floating rate note $150 million and Pakistan Telecommunication exchangeable bond $160 million.