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Mar 05 - 11, 2001

State Bank sucks in Rs10bn from inter-bank market

The State Bank on Thursday smoothly siphoned off Rs10.4 billion from a fairly liquid inter-bank money market. SBP said it raised Rs2.4 billion in one-week repo of treasury bills at 9 per cent; Rs1 billion in two-week repo at 9.25 per cent and Rs7 billion in four-week repo at 9.75 per cent. It said it rejected all the bids worth Rs4.9 billion for six-week repo. And that is where the story lies.

Bankers said SBP had to reject these bids as they were quite expensive: some banks had demanded 11-12 per cent yield on six- week repo of the bills fearing the money market might dry up in the coming days forcing them to borrow short term funds at high rates.

Perhaps these banks acted prudently because sources close to State Bank said SBP would not keep the money market wallowing in surplus liquidity after Eid holidays ending on March 7. Bankers said the market was still liquid after the Thursday OMO with an estimated excess liquidity of Rs5-10 billion that kept overnight call rates pegged to 2-3 per cent.

Keeping in view the size of excess liquidity still available in the market SBP announced to hold the next auction of treasury bills on March 3 prior to the Eid holidays starting March 5. The sale target is Rs3 billion.

Bankers said the reason why SBP was eager to suck in excess liquidity from the market was that it had to meet the IMF target about expansion its net domestic assets at the end of March.

Bankers said though the NDA target originally tough to meet had been relaxed by the IMF yet SBP was required to siphon off much of excess liquidity to meet the revised target. The revised target allows SBP to contain expansion in its NDA around Rs5 billion by the end of March 2001.

Sources close to SBP say the central bank also wants to contain excess liquidity in the inter-bank market to stabilize the rupee. The local currency fell by about two per cent to a US dollar in inter-bank market in the second half of February on increased demand for the dollars from private sector.

PSO, Shell hike furnace oil prices

Pakistan State Oil has raised the furnace oil prices to Rs10,517 per metric ton (pmt) from Rs9,857pmt, on Thursday.

Similarly, Shell Pakistan Ltd too, on Thursday, raised its prices by Rs762.45pmt to Rs10,608.75pmt from Rs9846.30pmt. Shell, on February 16 had already raised the prices of fuel oil to Rs9,846.30pmt from Rs9,579.50pmt.

Only 24 Modarabas declare dividends

For the year ended June 30, 2000, a total of 24 Modarabas declared dividends for their certificate holders, all except two (First Grindlays Modaraba and First Imroze Modaraba) are currently trading at varying discounts to their par value.

The two dozen Modarabas, which made profits and have announced payouts, measure to nearly three-fourth of all 37 listed with the Modaraba Association of Pakistan (MAP).

Sohail Osman Ali, Chairman of the association lamented that the discounted market prices of Modarabas in spite of the record of dividends, "clearly indicates that the public perception regarding members of the MAP is misplaced".

For the year 2000, five declared dividends in the range of 21.5 to 30 per cent; four paid between 15 to 20 per cent; six between 10 to 15 per cent and nine Modarabas gave out dividends up to 10 per cent.

IMF relaxes NDA target

Pakistan has won relaxation in the IMF target relating to net domestic assets of the State Bank after which the fears of a tighter monetary policy looming large have been evaporated for the time being.

Bankers close to SBP said, the central bank is no more bound to contain expansion in its NDA at minus Rs39.6 billion by the end of March. They said the IMF had relaxed the target by about Rs45 billion. This means that SBP can now allow an expansion of Rs5 billion in its NDA by end-March.

Return on FCY deposits reduced

The State Bank on Tuesday reduced by half a per cent the rates of return it intends to pay on the foreign currency deposits of banks in March.

SBP said it would pay 3.75 and 4pc return on one-month and three-month deposits in March instead of 4.25 and 4.5pc respectively. It said one-week deposits would earn 3.5pc return instead of 4pc.

Bankers said the decision was aimed at slowing down the pace of dollarization of bank deposits. They said after the rate cut they would find it less lucrative to mobilize foreign currency deposits that would eventually refrain people from holding money in dollars.

At the end of January, the foreign currency deposits of banks placed with the State Bank stood around $570 million or more than 50pc of the total liquid foreign exchange reserves of the country. There is no official word on the size of these deposits at the moment but bankers close to SBP say the amount has fallen to $525-$530 million still around 50pc of the reserves.

Rupee still weak

The rupee on Tuesday shed another five paisa to a US dollar in the inter-bank market due to ongoing corporate demand for greenbacks. Bankers said the rupee closed at 60.35/60.40 to a US dollar after testing an intra-day low of 60.48 to a dollar. They said the rupee fell as corporates made heavy buying of greenbacks to meet their day-to-day business needs as well as to make private debt payments.

Current account deficit falls

An increase in home remittances coupled with increased dollar buying from the kerb market helped Pakistan narrow its current account deficit to $681 million during July- December 2000 from $747 million in the year-ago period.

The second quarterly report of the State Bank released on Monday reveals that net private transfers on account of workers remittances from abroad totalled $609 million in the first half of this fiscal year. During the same period the State Bank bought $755 million from kerb market.