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 3. FINANCE  4. POLICY
 5. TRADE  6. GULF

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FINANCE

May 13 -19, 2002

NON-PEFORMING LOANS OF NCBS MAJOR PROBLEM

Non-performing loans (NPLs) of the nationalized commercial banks (NCBs) have become a major problem because of political interference and directed credits to individuals and companies.

"As a result of political interference and directed credits, NPLs have become a major problem and together with various taxes, explicit and implicit on intermediation, have led to spreads as high as 7-8 percentage points between deposit and lending rates," says a World Bank latest country report "Pakistan Development Policy Review - A New Dawn".

It said that Pakistan's financial sector developed along predictable lines, given direct state intervention in all the allocation of financial resources on the one hand and chronic fiscal deficits financed by borrowing on the other.

The amount of NPLs or the bad debts is said to have once again reached to about Rs300 billion.

There had been some reduction but due to reported new default cases, the amount has again touched the figure of Rs300 billion.

The report said that of banking system assets, NCBs and privatized banks account for over 60 per cent. Competition is limited. While NCBs have been a prime source of working capital loans, development finance institutions (DFIs) have been important in long-term credit.

According to the report, the banking sector has been undergoing deep restructuring since 1997. But following the May 1998 nuclear tests in India and Pakistan and subsequent cutoff in foreign aid, to avoid a massive capital outflow, the government converted foreign currency deposits into rupee or long-term foreign currency bonds at low interest rate. Despite the crisis the banking sector in 1990 was much stronger than in 1997 by most benchmarks.

FOREX MARKET CALM

The killing of sixteen people including twelve French nationals on Wednesday has made no visible impact on foreign exchange market. But bankers say a sudden fall in foreign investment is almost inevitable.

The rupee closed at 60.12/60.14 to a US dollar in the inter- bank market on Thursday down two paisa from the Wednesday close of 60.10/60.12. In the open market the rupee lost five paisa on Thursday to finish at 60.25/60.35 for spot buying and selling.

PSO SAVES $850,000 IN FUEL OIL IMPORT

The Pakistan State Oil (PSO) has saved $850,000 foreign exchange in import of 275,000 tons HSFO and 75,000 tons of LSFO.

According to a press release the PSO had invited tenders for the supply of HSFO and LSFO and the tenders were opened on May 2 in presence of representatives of suppliers/traders.

The bids were very competitive resulting in lower premiums as compared to term contract premiums. There were 11 participants for the PSO tender and six participated in the Japanese tender.

The premiums were identical in both tenders. HSFO premium ranged from $10.98 per ton to $19.95 for M/s Fal Oil and M/s Vitol respectively, against the term price of $12.88 per ton. The bids for LSFO ranged from $28.44 per ton to $45 per ton for M/s Fal Oil and M/s Hascombe Ltd respectively against our term premium of $34 per ton.

SIGMA LEASING CORPORATION

The Board of Directors of Sigma Leasing Corporation Limited announced on Tuesday that it proposed to issue 5 million right shares at Rs 7 each.

GOVT REPAYS RS22BN KESC LOANS

The government on Monday repaid on behalf of Karachi Electric Supply Corporation Rs22 billion to a number of banks that had lent to cash-strapped KESC.

The State Bank repaid Rs22 billion to state-run (i) National Bank (ii) Habib Bank and (iii) United Bank; partly privatized Allied Bank and two banking consortia led by ABN Amro and Faysal Bank respectively. Bankers said most of the banks purchased treasury bills out of the money they got from the SBP. A senior central banker made it clear that the SBP had not forced them to buy the bills. "They came to us with the request to issue T- bills," he said.

PAKISTAN EUROBONDS PRICE RISES TO $1

The price of Pakistan EuroBonds has risen from $0.60 to $1 between December 1999 and May 7, 2002 an increase of 67 per cent, claims an official announcement on Tuesday.

The price of these bonds had been rising constantly in the international bond market and for the first time these bonds were being quoted at par.

Pakistan government issued EuroBonds amounting to $620 million in November 1999 as part of debt restructuring agreed with Paris Club. They carry an interest rate of 10 per cent and are repayable in four equal instalments starting December 13, 2002.

SSGC LAUNCHES TFCS

The Sui Southern Gas Company (SSGC) on Tuesday signed agreement with consortium of banks for launch of its 5-year tenor second Term Finance Certificate worth Rs1,250 million.

WB LOAN FOR PROVINCES SOON

The World Bank has agreed to offer development loans to the provinces directly for which the federal government will stand as guarantor. The decision was part of the federal government's initiative to allow the provinces to seek loans from the international donor agencies according to their requirements and repayment capacity.

As a first step, new loans are being negotiated by the World Bank with the Sindh and NWFP governments. It was said that a $90 million rural development loan for Sindh and a similar loan worth $75 million for the NWFP are being discussed by the World Bank with the provincial authorities.

FAYSAL BANK

Faysal Bank Ltd. that now represents an entity comprising Faysal Bank Ltd. and Al-Faysal Investment Bank Ltd. (AFIBL) posted a pre-tax review of Rs252.86 million in the first quarter of this year.

The statement that covers January-March 2002 shows that the amalgamated bank earned Rs252.86 million pre-tax profit up 10.7 per cent from around Rs228.4 million earned during 2001.