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Jan 29 - Feb 04, 2001

Islamabad seeks $2 billion from IMF

Pakistan is seeking $2 to 2.5 billion poverty reduction growth facility (PRGF) from the International Monetary Fund (IMF) to replace the current $596 million standby arrangement (SBA), which is expiring in September this year.

"The government is negotiating a three-year PRGF programme relatively on less mark up rate and we hope to qualify for that new programme", said finance ministry spokesman Dr Waqar Masood Khan.

Briefing reporters on Thursday he expressed the hope that the government's difficulties would not increase when the ten months period of loan restructuring by Paris Club ended in September.

"We may not require funds for our balance of payment problems if we succeed to have PRGF", Dr Khan said, adding that so far the Club has restructured loans worth little over $5 billion.

He did not offer any comment when asked what would happen in September when another rescheduling will be required by Pakistan from the Club, keeping in view the still fragile balance of payment position. When pressed he said there was nothing on cards except to seek PRGF to meet with the future situation.

The additional secretary told a reporter that the State Bank had purchased $1.7 billion from the market in 1999 to avoid default on repayments of loans to foreign creditors.

Responding to a question he said Pakistan was not seeking from the IMF downward revision of various economic indicators set for the current financial year. He agreed that the budget deficit was still higher than the target of 4.3 per cent agreed with the IMF.

"But we have no plan to seek any revision of various targets which are otherwise expected to be achieved by the end of 2000-2001", he added.

Answering a question he said he could not give the exact budget deficit figure as final numbers have not been received for the first six months of 2000-2001.

Forex reserves under pressure

The foreign exchange reserves are coming under mounting pressures as bankers report a fall of 73 per cent in the foreign investment flow during the first half of current fiscal year, decline in the remittances for third consecutive month and increase in the trade imbalance to $938m.

Total foreign investment flow amounted to $74.7m during the last six months as against $276.6m in the first half of last fiscal. The outflow of portfolio investment gained pace, as bankers report a total withdrawal of $67.4m this year, as against $29.4m outward remittance in last fiscal.

Haemorrhage in portfolio investment has come mainly from the European countries as Swiss investors withdrew $22.5m and British called back $20.6m. The USA investors too, pulled out $9.3m.

$170m sold to banks

The State Bank of Pakistan, on Monday, sold back in the inter-bank market, about $170m it had bought from some banks in late December.

Bankers said banks paid more than Rs 10bn to the SBP to buy back $170m they had sold at the year-end to generate rupee funds. This pushed up overnight lending rates by 1-1.5 per cent.

Bankers said overnight funds were available at 11-13 per cent up from 10-11.5 per cent on Saturday. One-week funds were lent at 12 per cent, up from 11.5 per cent at the weekend.

Bankers said the rupee closed at 59.13/59.18 to the dollar in the inter-bank market showing little change over the weekend close of 59.12/59.17. They said despite outflow of Rs 10bn, most banks met their borrowing needs within the inter-bank market and only a couple of small banks had to borrow overnight funds from the SBP.


PTCL: Pakistan Telecommunication Company Limited (PTCL) posted an after tax profit of Rs7,156 million for the half year ended December 31, 2000.

ICP: Investment Corporation of Pakistan (ICP) posted an operating profit of Rs35 million for the financial year 1999-2000, compared with an operating loss of Rs217 million incurred the previous year.

PNSC: Pakistan National Shipping Corporation (PNSC) has sunk deeper into deficit. The latest accounts for the year ended June 30, 2000 showed that a pretax loss of Rs 488.5 million had been sustained by the national flag carrier. Pretax loss last year amounted to Rs 116.2 million.

Tax rate slashed

The federal government is considering reduction in tax rates on bank profits from 58 per cent to 43 per cent. This step is being taken in view of the present tax rate rendering the banking business unfeasible, say official sources.

Govt borrows Rs 5.3bn

The Sate Bank on Wednesday raised short term debt worth Rs 5.3 billion for the government through sale of treasury bills.

Bankers said SBP sold Rs 5 billion worth of three-month bills at a maximum yield of 10.5 per cent and Rs 353 million worth of six-month bills at 10.95 per cent.

Consortium for financing arrangement

National Bank of Pakistan has entered into an agreement with Sui Southern Gas Co for arranging and advising the gas company's term finance certificate issue of Rs3 billion.

NBP has joined hands with Standard Chartered Bank and Khadim Ali Shah Bukhari & Co to form a consortium for the financing arrangement. The proceeds of this issue will be utilized to finance a portion of the company's Gas Infrastructure Expansion Project.

$17.15m International Fund

A United Nations farm development body said on Tuesday it would provide a loan of $17.15 million to Pakistan to help boost farm projects along its border with Afghanistan.

The International Fund for Agricultural Development (IFAD) said the loan would be used to finance a $21.86 million scheme called the "Southern Federally Administered Tribal Areas Development Project".

IFAD said that to date they had financed 17 projects in Pakistan in loans totalling $298.5 million.

Taiwan to invest Rs300m

Taiwan has decided to invest in Pakistan by setting up a Cone Dying & Bleaching Unit in Kotri at an estimated cost of Rs300 million, said Mr Jackson Cheung, Leader of Taiwan Trade delegation.