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 5. TRADE  6. GULF



Jan-28 - Feb-03, 2002

Discount rate lowered to 9 per cent

The State Bank of Pakistan on Tuesday cut its discount rate by another one per cent to 9 per cent to pull the economy out of slump. This is the fourth cut in a row so far this fiscal year. The new rate will be effective from Wednesday (January 23).

The State Bank had earlier cut the discount rate from 14 to 13 per cent in July and then to 12 per cent in August. On October 20 the central bank had made a huge two per cent cut to bring down the rate to 10 per cent.

Economists and bankers say the recent cut in the discount rate was very much expected. They say that a low inflation and stable exchange rate had created room for the central bank to lower the discount rate.

Discount rate is the rate at which banks can borrow money from the SBP for up to three days against approved government securities. As such it is regarded as one of the best benchmarks of lending rates. Bankers say the recent cut in the discount rate would encourage the banks to cut their own lending rates. The previous cuts in the discount rate had not drawn such a response from the banks for a number of reasons.

One of the reasons was that a large amount of banks profit was stuck up with the Central Board of Revenue in tax refunds. As the CBR has only recently promised to release part of that amount (Rs22 billion out of more than Rs55 billion) the banks are now able to respond to the cut in discount rate by lowering their own lending rates.

Finance Minister Shaukat Aziz had grilled top bankers this month for their failure to respond swiftly to changes in the monetary policy. President Gen Pervez Musharraf had also taken notice of high lending rate of banks that had a crippling effect on the private sector business activities.

T-bill yields fall sharply

The State Bank on Wednesday cut the weighted average yield on treasury bills by 1.39-1.51 per cent in line with a one per cent cut in its discount rate announced on Tuesday.

The twin steps are aimed at reinforcing earlier signals about easing of the monetary policy to enliven the sagging economy. A senior central banker said the banks should translate the cut in discount and T-bills rates into lower lending rates and help the private sector accelerate investment and production activities.

The SBP on Wednesday slashed the weighted average yield by 1.51 per cent to 6.13 per cent on three-month T-bills and by 1.42 per cent to 6.34 per cent on six-month T-bills. The central bank cut the weighted average yield one-year T-bills by 1.39 per cent to 6.81 per cent.

$109m second IMF tranche in March

The International Monetary Fund (IMF) will disburse second tranche of $109 million, out of $1.3 billion poverty reduction and growth facility (PRGF), in March due to improvement in the economy.

Official sources told on Saturday that the Fund officials appreciated the current state of the economy, specially increase in the foreign exchange reserves to about $5 billion, and said there should not be any problem to offer next tranche of $109 million to Pakistan by early March.

FDI up by 39pc in July-Dec

Foreign direct investment (FDI) has increased by around 39 per cent during first six months of the current fiscal year, notwithstanding a declining trend in imports, exports and revenue collection.

Foreign remittances amounting to $982.32 million in first six months also increased by 61 per cent when compared with $609.20 million during the same period last year.

Sugar prices fall

The unsold stocks of white refined sugar with sugar mills have risen to 0.459 million tons as the lifting, both from commercial traders and general wholesalers, is not in consonance with the rising production.

As a result wholesale prices in the open market have fallen to Rs1,920 from Rs1,980 per bag of 100 kgs.

NBP to offer 5pc more shares

The National Bank of Pakistan (NBP) will issue five per cent more shares for public subscription in the first week of February, said bank chief Ali Raza after signing a Rs195 million loan facility for the Saigols Qingqi Motors Ltd (SQML) on Wednesday.


PTCL posted after tax profit of Rs8.501 billion for the half year ended December 31, 2001, up 19 per cent from Rs7.156 billion earned by the monopoly utility in the corresponding period of the previous year; most analysts had worked out a figure of between Rs8.5 to Rs9 billion.

Scope of KIBOR expanded

Bankers on Monday wrote some history again by expanding the scope of KIBOR or Karachi inter-bank offered rates to one-week and two-week tenures and increased its validity from five to 15 minutes.

Senior bankers said one-week and two-week KIBOR was worked out at 3.04 and 4.15 per cent but they would not say whether any deals were struck in the new tenures. One-month, three-month and six-month KIBOR stood at 5.53 per cent, 6.70 per cent and 7.30 per cent respectively.

HBL offers finance in dollars

Habib Bank Ltd (HBL) will provide pre-shipment finance in US dollars to its customers against Letters of Credit (LCs) or firm contracts for up to a maximum period of 180 days.

Lever Brothers Pakistan

Lever Brothers Pakistan Limited announced fourth quarter (October-December 2001) after tax profit amounting to Rs331 million on sales valued at Rs5,397 million.

Canada converts debt into grant

The Canadian government has decided to convert Pakistan's entire debt of 447 million Canadian dollars into grant for development. This was disclosed by the Canadian Deputy Prime Minister, John Manley.

Withholding tax

The government has decided to abolish withholding tax levied on telephones, outstation cheques and petroleum products from July 1, 2002. Official sources told that the decision was in line with the International Monetary Fund's (IMF) conditionalities for getting the poverty reduction and growth facility (PRGF).