April 15 - 21, 2002
SBP SEEKS INTEREST RATE STABILITY
The State Bank on Thursday injected Rs6.3 billion
into cash-strapped money market to keep interest rates stable. Bankers
said the SBP made the injection by purchasing treasury bills under
reverse repo arrangement at 6.5 per cent. The SBP had pumped in Rs700
million on Monday under the same arrangement — and at the same rate.
Bankers said the injection came as a big relief to
the market that had discounted by Rs2.2 billion on Wednesday. That is
some banks had to borrow Rs2.2 billion from the State Bank against
approved securities to square their liquidity position at the end of
the day. "Had there been no injection today the market would have
resorted to even more discounting," said treasurer of a big bank.
He said the injection brought the overnight call rate down by 4-7.5
per cent on Thursday from 8-8.90 per cent on Wednesday.
Senior bankers said they were expecting the market
to discount heavily on Thursday ahead of reserve averaging on Friday,
adding that Rs6.3 billion would more or less enable the banks to
average out their reserve requirements on Friday. Some of them said
the market might seen a modest discounting on Friday even after this
Banks are bound to keep five per cent of their
deposits as cash reserves with the SBP on weekly basis but they are
allowed to let the amount fall to four per cent on any given day.
Since most banks keep their daily reserves at four per cent they have
to raise it to five per cent on Friday — the last working day for
this purpose. This is called reserve averaging.
Senior bankers said that Rs6.3 billion injection
reinforced earlier by the SBP signalled that it wanted stability in
"The SBP wants to keep the inter-bank market
slightly liquid to maintain the present level of T-bills rates in the
next auction," said treasurer of a local bank.
NWFP TO GET WORLD BANK LOAN
The NWFP is set to get $400 million soft-term loan
from the World Bank under Programmatic Structural Adjustment Credit (PSAC)
facility, official sources told on Wednesday.
"The province will shortly enter into a $400
million loan agreement with the World Bank in the near future,"
said a senior officer of the provincial government.
UK OIL FIRM TO INVEST $8 MILLION
A British Company Nativus Resources with its joint
venture RDC International will invest $8 million for oil and gas
exploration in 2,344 square kilometres area of Qila Saifullah and
Pishin districts in Balochistan.
Under an agreement signed between the company and
the Ministry of Petroleum and Natural Resources on Thursday, the
company will review the geological data in the first year and conduct
recording of 2,000 gravity and magnetic stations.
In the next year, the company will carry out survey
of 150 kilometre area to select drilling site for oil and gas
Nativus Resources for the first time has been
involved in oil and gas exploration in Pakistan.
This company has a vast experience of oil
exploration, oil production and marketing. Its partner, RDC
International, has also been involved in oil exploration in
SBP WARNS BANKS OF CAP ON PIB HOLDING
The State Bank on Tuesday warned the banks that it
will cap their holding of Pakistan Investment Bonds if they do not
voluntarily reduce it.
Bankers said two senior SBP officers told
treasurers of more than a dozen banks at a meeting that the banking
sector was holding 60 per cent of the PIBs issued so far. They said
SBP Economic Adviser Dr. Abdul Naseer and Executive Director Farhat
Saeed made it clear that the banking system should not hold more than
25-30 per cent of these long-term bonds.
MONEY SUPPLY BEGINS TO FALL
The rate of growth in money supply has begun to
fall removing fears of inflation going up after a lag of time. Money
supply had risen by 10.67 per cent up to March 16 against the initial
target of 9.54 per cent set for the full fiscal year July-June
Though central bankers believed that it would not
push up inflation as the economy was not advancing well yet analysts
feared that its inflationary impact might be felt after some time. The
latest SBP statistics should remove this fear as according to it the
rate of growth in money supply fell to 10.19 per cent on March 23.
Sources close to SBP say the rate may decline further.
ALHAMD TEXTILE MAY BUY BACK TREASURY STOCKS
Alhamd Textile Mills Limited — the textile
spinning mill at Multan — is possibly writing a new chapter in the
country's corporate history by making the first 'buy-back' of
company's own shares.
The company said in an announcement on Tuesday that
it had called an extraordinary general meeting of the shareholders on
April 30, when a resolution would be moved to buy-back 1.631 million
shares at a price of Rs21 per share. The buy-back is proposed to be
made through an open tender to be published in leading newspapers.
INTER-BANK MARKET SHORT OF LIQUIDITY
The inter-bank money market braved a serious
liquidity crisis this week as the State Bank started returning to the
banks some foreign currency deposits.
Bankers said more than Rs25 billion discounting
took place in the week ending on April 6 as traditionally liquid major
banks stopped lending into the market. They said the liquidity dried
up as the SBP started returning to banks from $318 million foreign
currency deposits that they had attracted as incremental deposits in
the $11 billion foreign currency deposits frozen on May 28, 1998.
BANKS TOLD TO START LOANING
The State Bank has asked heads of the banks to ensure disbursement
of agricultural loans to needy farmers and flour millers for
construction of wheat godowns and silos.