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KARACHI, March 28: The State Bank has closed out $211 million rupee-dollar swap that it had contracted with some leading banks a year earlier.
In other words the SBP has returned to the banks $211 million that it had bought from them in March 2001 at different forward exchange rates with the average falling somewhere between Rs63- Rs64 per dollar. The SBP had purchased these dollars with the understanding that it would resell the same to the banks in March 2002 at the exchange rate prevailing at that time.
Sources close to SBP say since the current exchange rate is a little more than Rs60 per dollar the SBP has earned well over Rs600 million profit by closing out the $211 million swap. They say the central bank will also close out by end of June this year another $100 million plus rupee-dollar swap that was contracted up to June 2001.
The sources say the closing out of this $100 million swap would also earn the central bank some profit as the price at which the dollars were bought is expected to remain much higher than its anticipated value by end of June this year.
The sources say what is good about the closing out of the $211 million swap is that unlike in the past it has not caused a loss to the SBP. Losses incurred on swap deals were part of the Rs49 billion financial loss that the SBP suffered in fiscal year 2000-01.
RESERVES HIGHER: The State Bank has not only managed to keep its liquid foreign exchange reserves intact despite the return of $211 million to the banks it has rather increased the reserves.
The SBP has done this through aggressive buying of dollars from the inter-bank market. The SBP currently holds $3.6 billion out of the total $5.3 foreign exchange reserves. The remaining $1.7 billion is with the banks. On March 16 SBP held $3.4 billion out of $5.152 billion.
Sources close to SBP say the $5.3bn reserves do not include the $107m second tranche of an IMF loan that Pakistan would get soon. The IMF Board of directors approved the release of the second tranche of $1.3bn poverty reduction and growth facility the other day and SBP may get the amount in a couple of days. Once the amount is credited into SBP account the gross liquid foreign exchange reserves should rise past $1.4 billion.
The State Bank has also started returning $318 million worth of those foreign currency deposits to the banks that had flown into frozen foreign currency accounts. The banks had surrendered this incremental foreign currency deposits with the SBP and were getting their rupee equivalent. The amount is to be returned to the banks by end of June this year. But sources close to SBP say this too would not decrease the foreign exchange reserves. They pin their hopes on rapidly rising home remittances that have reached $1.4 billion in the first eight months of this fiscal year.
