November 18, 2001	Sunday	Ramazan 2, 1422

KARACHI, Nov 17: The State Bank bought around $79 million from the open currency market in October that brought its total buying in the last four months to $476 million. In July-September this year the SBP had bought $397 million from the kerb market.

Senior bankers say the central bank also purchased about $350 million from the inter-bank market last month but no official figure of such purchases are available. Some central bankers only confirm the outright purchases of $476 million from the kerb market during July-October but they do not want to go on record.

A close study of the official figures for the July-September balance of payments confirms that the State Bank purchased $397 million from the kerb market in the first quarter of this fiscal year. Money changers say — and central bankers confirm privately — that the SBP bought another $79m from kerb in October but this figure would reflect as part of the SBP purchases in the second quarter of 2001-02.

The $476 million, bought from the kerb market in July-October, helped the State Bank build its liquid foreign exchange reserves. The State Bank reserves rose from $1.68 billion at the close of the last fiscal year in June 2001 to $1.99 billion at the end of October 2001 showing an increase of $310 million in four months.

The overall liquid forex reserves of the country also went up from $3.22 billion at the end of June to $3.60 billion at the end of October, showing a buildup of $380 million in the past four months. In addition to its kerb market purchases what else helped the SBP build up its reserves after making all external payments that fell due in July-October was the inflow of foreign exchange after the September 11 terror attacks on New York and Washington.

That precisely enabled the SBP to make heavy dollar buying from banks and use the same to fill in the gaps in the balance of payments. Bankers say the SBP bought more than $350 million from banks last month of which $300 million were purchased in ready and the rest in forward.

RELIEF TO EXPORTERS: Whereas the SBP dollar buying from both the inter-bank and kerb market increased the foreign exchange reserves its dollar buying from inter-bank market in particular made another contribution.

Central bankers say the SBP dollar buying from the inter-bank market kept the greenback (that had been on the slide since September 11) from falling to new lows. Thus it provided sort of relief to the exporters whose export competitiveness had come under question because of the constant fall in the dollar value.

Senior bankers say the SBP continued buying dollars from the inter-bank market in the first two weeks of this month to build up its foreign exchange reserves on the one hand and save the exporters from becoming uncompetitive on the other. But they say the SBP had to suspend dollar buying both from the banks as well as from the kerb market when the dollar rose by more than three per cent to Rs62.20 earlier this week. It is not clear how long the central bank would refrain from buying greenbacks from the two markets. Senior bankers say the SBP may restart dollar buying after making it sure that it would not lead to skyrocketing of the greenback all of a sudden.