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
"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
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
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
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
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 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
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.