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KARACHI, Dec 6: The State Bank purchased at least $900 million from the inter-bank market in the last two months. Bankers close to SBP said the central bank bought a small part of the amount in forward but they could not quantify it.
The bankers said the State Bank bought dollars from some major local and foreign banks. They said that huge amounts of foreign exchange had started flowing into these banks after September 11. Keeping dirty money abroad had become difficult due to stricter checks put on money laundering.
The State Bank statistics released on Thursday put the total liquid foreign exchange reserves at $4.4 billion as on December 1. Of this, the SBP held $2.8 billion and all the banks $1.6 billion.
At the end of September, Pakistan’s total liquid reserves stood at $3.3 billion. Of that, the SBP held $1.7 billion and all the banks $1.6 billion. Bankers say what raised the SBP reserves to $2.8 billion by end-November despite making all external payment was $900 million buying from the banks. The $600 million US aid that came last month also led to a sudden growth in the reserves.
The reserves of the banks are still at $1.6 billion because they sold to the SBP the additional foreign exchange they received over the last two months. The SBP officials make no comment on this issue.
EXPORTERS BENEFITED: Bankers say heavy SBP dollar buying in October-November saved the exporters from the exchange rate loss.
Immediately after the September 11 attack on the US, the dollar had started falling. Though this benefited foreign debt-laden Pakistan in many ways, it started hurting exporters. Had the SBP not started purchasing dollars from the inter-bank market, loss in exports would have outweighed the gains of rupee appreciation.
Since September 11, the dollar has so far fallen by about five per cent in the inter-bank market. Financial analysts say if the greenback had shed more value, it would have ruined the exporters. The exporters are already losing business as foreign buyers have cut their purchases from Pakistan since the start of the US-led war in Afghanistan.
SWAP WINDOW: Bankers say heavy dollar buying from banks would help the central bank set up a rupee-dollar swap window. That facility would enable the State Bank to buy or sell dollars in the market without destabilizing the exchange rate. This has become necessary as the time is gone when the SBP used to make direct interventions to stabilize the exchange rate. “The swap window would also reduce the SBP dependence on the open market for dollar buying,” said a senior banker. The State Bank had bought $1.6 billion from the kerb market in fiscal year (July- June) 2000-01.
OPEN MARKET PURCHASES: In the first quarter of this fiscal year (July-June 2001), the SBP purchased $397 million from the kerb market. But heavy dollar buying from banks in October- November naturally lowered the volume of open market buying.
Official figures are not available but bankers close to SBP say the central bank purchased about $95 million from the open market in the last two months.
