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Feb 19 - 25, 2001

SBP sucks in Rs15.5bn from money market

Though Pakistan is yet to decide whether it should enhance its interest rates as demanded by the IMF, the State Bank has indicated that it would contain liquidity in the money market. Whereas it is to be seen if it leads to a tighter monetary policy, containing liquidity in the money market would shore up the rupee that has been on the fall for past few days.

The SBP on Thursday kept the yield on treasury bills in one- week and eight-week repos higher than the previous cut-off on two-week and six-week repos.

The SBP said it sucked in Rs15.5bn from inter-bank market in one-week and eight-week repos of treasury bills at 9.5 and 10.25pc at its open market operation, respectively. On February 1, SBP mopped up Rs12.35bn through two-week and six-week repos at 9 and 9.5pc.

Bankers said outflow of Rs15.5bn from the inter-bank market pushed up lending rates adding that overnight call rate rose to 11.5pc from only two per cent on Wednesday. They said some banks also had to borrow overnight funds worth more than Rs2.2bn from SBP at its fixed repo rate of 13pc. They said a tight money market would shore up the rupee that has been on the fall for past few days due to buying of dollars by corporates and those going to Saudi Arabia for Hajj.

The rupee closed 10 paisa down overnight at 59.42/59.44 to a dollar in inter-bank market.

Bankers said the Thursday cut-off was a clear indication that the SBP had started further tightening of monetary policy on the demand of the IMF. But two senior central bankers said higher cut-off on T bills repos meant that the SBP would no longer keep the money market excessively liquid. They said they would not be surprised if the market interpreted this as a prelude to a tighter monetary policy.

Inflation inflicts 10pc forex losses

Pakistan has lost around 10 per cent foreign exchange earnings from its exports due to inflation during the first seven months of the financial year 2000-01, according to an analysis of the official foreign trade statistics.

The statistics showed 9.57 per cent rise in exports in terms of dollars as against an increase of 19.56 per cent in terms of Pak rupee, compared to the corresponding period previous year. In absolute terms, the shortfall comes to more than $521 million.

In many cases, the drop in exchange value of the rupee under conditionalities of the Bretton Woods institutions cancelled the benefits that might have accrued from the increase in the volume of exports.

The loss due to devaluation was further compounded by the fact that most of the major items were exported at reduced unit value, thus sharply reducing the impact of increase in volume. Thus although the quantity of cotton yarn exported during the period under report exceeded those of July-January 1999-2000, the accrual in terms of dollars was only 2.60 per cent higher.

Increase in interest rate not possible, IMF told

The visiting five member IMF review mission headed by Ms Sena Eken has asked the nationalized commercial banks (NCBs) to increase rate of interest with a view to improving their financial health.

"But we have told the mission members that there is hardly any space and potential available to increase the banks' interest rate", said the President of Habib Bank Limited (HBL), Mr Zakir.

He told reporters at a briefing on Tuesday that the IMF mission had met bankers and financial experts in Karachi on Monday where the issue of increasing banks' interest rate was discussed.

Oil prices may come down

The Federal Secretary for Petroleum and Natural Resources, Abdullah Yusuf, has expressed the hope that oil prices will come down next month in view of the declining prices of the commodity in the international market.

Addressing a press conference on Thursday, he said oil prices in international market were lower in December and January but went up in February because of production cut by OPEC.

PSO

Pakistan State Oil (PSO) has earned a after tax profit of Rs 1.35bn on sales revenue of Rs 82bn during July-Dec 2,000 as compared to the same period of 1999.

Pakistan offers loan to Lanka

Pakistan has offered to lend Sri Lanka 20 million dollars to buy arms to battle a minority Tamil separatist rebellion, military officials said on Tuesday.

"We have been offered a 20 million dollar line of credit for military requirements," military spokesman Brigadier Sanath Karunaratne said. He said the offer was made during a visit to Sri Lanka last month by a senior official of the Pakistan army.

Record credit given to private sector

A high level meeting presided over by Chief Executive General Pervez Musharraf was told on Tuesday that the nationalised commercial banks have extended a record Rs 90 billion in credit to the private sector during the first seven months of 2000-2001.

However, the chief executive asked the presidents of National Bank of Pakistan (NBP), Habib Bank Ltd (HBL) and United Bank Ltd (UBL) who were also present in the meeting, to drastically improve their financial health so that they could be privatized as early as possible.

Askari Bank

Askari Commercial Bank Limited announced an increase of 12 per cent in after tax profit to Rs315.6 million for the year ended December 31, 2000, from Rs282.4 million the previous year.

Pakistan State Oil cuts LPG price

Pakistan State Oil (PSO) has reduced the prices of liquefied petroleum gas (LPG) by 20 per cent. Domestic LPG cylinder will now cost Rs185 (exclusive of distributors' commission) as compared to Rs233 , said a PSO spokesman.

Saudi Pak to provide Rs397m financing

The board of directors of Saudi Pak Industrial and Agricultural Investment Company approved a total financing of Rs397m to 11 companies.

The financing comprises Rs262m for six companies in manufacturing sector, Rs80m for three companies in financial sector and Rs35m for two companies in fisheries and services.