March 23, 2002	Saturday	Muharram 8, 1423

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KARACHI, March 22: The government has decided to stop the sale of special US dollar bonds against cash payment in dollars to reduce its liability of foreign exchange. It has also decided not to pay five per cent rupee redemption bonus to those who wanted to encash these bonds into rupees.

The decisions were made on Friday through changes in special US dollar bonds rules of 1998. The State Bank informed the banks about the decisions through a circular issued the same day.

Currently Pakistan has an outstanding stock of $1.16 billion worth of special dollar bonds.

Until now there were three sources of financing the purchase of these bonds: (i) frozen foreign currency accounts (ii) foreign currency bearer certificates and (iii) cash payment in dollars using fresh foreign currency accounts.

The bankers said the reason why the government has stopped paying rupee redemption bonus is that when the bonus was introduced the spread between the inter-bank and kerb exchange rates stood at Rs2-3 per dollar. They say since the spread has now fallen to a few paisa there is no need of giving this bonus.

The decision also shows that the government has the ability to allow redemption of these bonds in dollars rather than in rupee as the country has enough foreign exchange reserves now than in the past.