Apr 30 -
May 06, 2001
'B'-plus rating for investment bonds
Standard & Poor's on Monday assigned its single-'B'-plus
senior unsecured debt rating to bonds totalling Rs11.2 billion, issued recently
by the Islamic Republic of Pakistan.
At the same time, Standard & Poor's affirmed all its
ratings on Pakistan, including the single-'B'-minus long-term foreign currency
and single-'B'-plus long-term local currency ratings.
The outlook on the long-term ratings is stable.
The newly rated bonds, carrying coupon rates of 12.5%, 13%,
and 14% on bullet maturities of three, five, and 10 years respectively, form
part of an ongoing government initiative to shift to market-based pricing on
The ratings on Pakistan are constrained by:
High public-sector indebtedness and other structural fiscal
The twin burdens of public-sector net debt as a proportion of
GDP, at about 105%, and public-sector net external debt as a proportion of
current-account receipts, at about 200%, are among the heaviest of rated
With interest payments consuming about 45% of general
government revenue and with a projected real GDP growth trend of about 4% per
year, primary surpluses of at least 2% of GDP are required for medium-term debt
A fragile international liquidity position. With about $545
million of the central bank's foreign currency assets held in overseas branches
of Pakistani banks, usable gross reserves stand at only $1.1 billion (including
gold), less than one-half of the economy's external principal-repayment
obligations for the remainder of this year.
The risk of further Paris Club-related selective defaults.
Ongoing compliance with IMF conditions is increasing the likelihood of a third
Paris Club deal, to reschedule debt service due from October 2001 onward,
raising the spectre of foreign currency bank-loan and/or Eurobond defaults
driven by private creditor burden-sharing criteria.
State Bank not to buy dollar from kerb
As National Bank has started buying foreign exchange from
private money changers raising the level of inflows in inter-bank market, the
State Bank may stop buying dollars from the open market. But how long the SBP
abstains from dollar buying is yet to be seen.
SBP sources say the central bank may not buy dollars from
open market at least in the remaining part of this fiscal year i.e. up to June
2001. SBP suspended dollar buying from kerb at end-March three weeks before
allowing National Bank to purchase all foreign currencies from private money
There is no official word from SBP on whether it would
restart dollar buying from kerb, but sources close to it say it would not. SBP
bought more than $1.5 billion from open market in the first nine months of the
current fiscal year i.e. between July 2000 and March 2001. In full last fiscal
year it had bought $1.6 billion.
Money changers sell $15 million to NBP
More than a dozen money changers have sold foreign currencies
worth about $15 million to state-run National Bank in just three days and none
of them have bought any foreign exchange from the bank.
"Fourteen money changers have so far opened accounts
with NBP and sold about $15 million," said president of Forex Association
of Pakistan Malik Bostan. NBP sources confirmed that the numbers were close to
reality. They said at present only the Karachi branch of the bank located at I.I.
Chundrigar Road was buying foreign currencies from money changers, adding that
preparations were under way to start similar operations in eight other cities
Consumer banking, which helps the documentation process, has
vast potentials to grow, if the social protection system is provided to
facilitate housing loans.
Globally, the housing loans dominate the consumer banking. In
Pakistan, consumer banking has not explored even one per cent of the potential
of the domestic market.
Siemens sales at record
Siemens Pakistan Engineering Company Limited posted a record
Rs2 billion in sales, but almost a flat bottom line, for the first half of the
current year, (Oct-March 2000-01). The financial figures unveiled by the
company, on Tuesday, showed sales growth at 22.6 per cent to Rs2.031 billion
from Rs1.656 billion in the corresponding period of the previous year.
Mobilink to invest $400mn
Mobilink GSM intends to invest $100 million next year and
$400 million in the next five years in Pakistan in its expansion and
development. This was stated by President and CEO of Mobilink GSM, Al F. Barry
while performing the inauguration of the Customer Service Centre at the Awami
Markaz on Wednesday.
ADB to provide $2.5 bn
Asian Development Bank will provide financial assistance of
US$2.5 billion for poverty reduction to Pakistan within next five years. The ADB
has also appreciated the economic reforms agenda of the government.
Not only that United Bank Limited (UBL) did not require Rs21
billion capital injection from the federal government, it has earned an
operating profit of Rs2 billion during the current year, the bank President Amir
Zafar Khan said while talking at a local hotel on Monday.
$300mn WB loan
The World Bank is expected to provide a fresh power sector
programme loan of $300 million to consolidate WAPDA's reform and restructuring
process and strengthen its 12 corporate entities.
WB okays $350mn
The World Bank has approved a $350 million "highly
concessional" Structural Adjustment Credit for Pakistan to help improve its