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Sep 25 -Oct 01, 2000

High forward rates hit importers

The State Bank on Thursday made another intervention in the inter-bank foreign exchange market to contain the surge of the dollar.

Bankers said the State Bank sold $5-$10 million on ready counters that pushed the dollar down to Rs 57.70 after enjoying an intra-day high of Rs 58.40. But after normal trading hours the dollar shot up again to Rs 57.90 as some banks started buying to square their short positions.

The SBP had intervened in the market also on Wednesday. It had sold $15-$20 million in three month forward to contain the rise of the dollar.

Bankers said whereas the Wednesday intervention had stabilized both ready and forward rates this was not the case on Thursday. They said forward premiums in the inter-bank market shot up to such high levels as 225 paisa over spot price for six months; 115 paisa for three months and 40 paisa for one month. On Wednesday the premiums had fallen to 175 paisa for six months; 80 paisa for three months and 25 paisa for one month.

In practical terms high forward premiums in inter-bank market means expensive forward buying for the importers. For example if the inter-bank premium on six month is 225 paisa per dollar the banks would quote six month forward price to the importers at 250 paisa or so. In simpler words an importer will book a dollar for delivery after six month at 60.50-if the premium is 250 paisa.

Importers need to make forward buyings of the dollar to hedge their positions against rupee depreciation in future. That is why forward premiums go up when there is panic in the market and they come down when sentiments cool off. An unusual rise of the dollar this week has turned importers panicky thanks to some foreign banks in particular and others in general that are out to make money by keeping the importers in queue.

LC limit for raw sugar import fixed

Letter of Credit (LC) opening limit for import of 5,00,000 tons sugar has been fixed for importers to resolve the problem of sugar shortage in the country.

According to official sources, government has already instructed CBR as well as the State Bank accordingly to ensure strict compliance of these instructions.

The importers of sugar have been allowed import of only above 600 category raw sugar in bulk form at zero duty.

Economic Coordination Committee (ECC) had approved category above 600 ICUMSA of raw sugar in bulk form for import at zero duty and rest of the categories of raw sugar will be charged according to normal tariff.

The decision to import raw sugar, sources said, will save foreign exchange spending by $ 50 to 60 per ton due to price difference between raw and refined sugar.

Raw cotton export

Raw cotton export from new crop is gradually gaining momentum and out of 100,000 bales contracted for export around 18,090 bales have been physically shipped, official sources disclosed on Thursday.

Under the new cotton policy, the government has allowed export of raw cotton from the start of cotton season i.e. Sept 1. Similarly, duty-free imports have been permitted by the government to maintain a balance between the stakeholders of the cotton economy.

According to official figures, so far, TCP has exported around 16,930 bales out of new crop, while private exporters made physical shipment of around 1,160 bales.

Though the size of the crop at this early stage could not be ascertained, however under new policy, the government in order to provide protection has asked the TCP to work out a stabilizing force and make sure that phutti prices do not fall below Rs725 per 40kg.

PSO awards tender

Pakistan State Oil has awarded the tender to four international suppliers for supply of furnace oil to be delivered during October to December 2000.

Petronas of Malaysia, Vetol of Switzerland, Fal Oil of Sharjah and Bakari of Saudi Arabia got the contracts to supply fuel oil after emerging as lowest bidders, a PSO official told on Monday.

PSO had invited bids for supply 1.035 million metric tons of high sulphur fuel oil (HSFO) and 150,000 tons of light sulphur fuel oil (LSFO) on August 20 for fuel oil to be delivered during October, November and December for 25 cargoes.

Tyre dumping

Pakistan has been under the onslaught of increased dumping of tyres and tubes from East Asian countries, including China ever since the government replaced the Import Trade Price (ITP) with the World Trade Organization's evaluation system last January, according to a reliable source.

This is one of the factors which have posed a serious challenge to the survival of the tyre-and-tube industry in Pakistan.

TCP tender

The Trading Corporation of Pakistan has floated an international tender for the export of 17,791 bales of various varieties of raw cotton.

A TCP official said on Thursday that tender includes the export of 10,000 bales of Afzal 1-1/32" from the new crop and 6,000 bales of Afzal from previous crop.

Other varieties included 1,100 bales of 1414 1-1/16", 300 bales of 1467-type and 295 bales of 1503-type and 96 bales of 1505-type, he added. He said the closing date of the tender is Sept 28 and the bidding will be held on Sept 29, at TCP head office.

Kuwait, a big market

Kuwaiti Ambassador, Mohammed Ahmad Al-Mijrin Al-Roomi, has called upon the Pakistani exporters to fully avail the opportunities existing in Kuwait as there exist rich potential for Pakistani goods.

Speaking at the Faisalabad chamber of commerce and industry, he said the imported goods in Kuwait was subjected to only 4 per cent customs duty and that's why it was cheap to shop there.

Ambassador Ahmad said there was also a "Free-trade Zone" in Kuwait with excellent banking facilities which could greatly facilitate both importers and exporters.