October 26, 2001	Friday	Shaba'an 8, 1422

KARACHI, Oct 25: The State Bank purchased about $400 million from the open currency market between July-September to build its foreign exchange reserves.

Sources close to the SBP say the central bank is still buying dollars from the kerb but the daily purchase volume is shrinking.

In fiscal 2000-01 the SBP had to purchase $2.1 billion from the open market to fill in the gap in the balance of payments and to build up its reserves.

The sources said the central bank purchased about $310 million in August-September adding that it had purchased only $90 million in July.

They said the SBP had to buy more dollars in August-September than in July to finance official debt payments besides keeping the inter-bank foreign exchange market liquid enough to finance private debt payments and foot oil import bills. But after the quarter-end, SBP dollar buying from the open market decelerated as external debt payments shrank and oil import bills contracted.

Both the government as well as the corporate sector make most of debt payments at the end of each quarter of the fiscal year that begins in July and runs through June next year. Oil import bills are also footed mostly on the quarterly basis though some payments fall in between.

Pakistan spent more than $750 million on import of petroleum products in July-September. It also made official debt payments of about $400 million and military debt payments of $100 million. Further, the corporate sector spent about $300 million in private debt payments and other outward remittances during this period.

Bankers say SBP dollar buying from kerb in July-September not only enabled the market to remain current on debt payments and facilitated outward remittances by portfolio investors but it also kept the rupee stable.

The rupee had closed around 64 to per US dollar in the inter- bank market at the end of June this year. When the first quarter ended on September 30, the rupee was still trading at 64.00/64.05 to a dollar. In other words the local currency remained stable throughout the first quarter. (So far this month the rupee has risen by 3.5 per cent mainly due to larger inflow of dollars in the wake of the September 11 terrorist attacks on the US soil).

No officials figure is available about the SBP dollar buying from the kerb market during this month but sources close to the SBP say it is peanuts as compared to what the central bank has been buying in previous months.

FOREX RESERVES: Meanwhile liquid foreign exchange reserves of Pakistan rose to about $3.434 billion on October 20 from $3.351 billion on October 13—showing a buildup of 83 million within a week.

According to the latest SBP figures released on Thursday, the reserves held by the SBP rose to $1.851 billion on October 20 from about $1.764 billion on October 13. But at the same time the reserves held by all other banks fell to $1.583 billion from about $1.588 billion. No official word is available on what led to a rise in the SBP reserves, but sources in the SBP attribute it to heavy dollar buying from the inter-bank market during the week ending on October 20. They also made it clear that the central bank has so far not received “even a single dollar” from the US, the UK, Japan and other nations out of the aids and grants they promised to give Pakistan for its crucial support to the US-led air strikes on Afghanistan.