KARACHI, May 1: Encashment of special US dollar bonds goes on despite the withdrawal of five per cent rupee redemption bonus for those who want to get the rupee equivalent of these bonds.

The State Bank figures show that people encashed $33 million worth of these bonds within the first three weeks of last month.

The government had announced in late March the withdrawal of five per cent rupee redemption bonus and the decision was to take effect from April.

But many bond holders say their banks denied the bonus even in the cases where request was made for the encashment before April.

The SBP figures show that the amount of net outstanding US dollar bonds fell to $1.069 billion in the week ending on April 20 down from $1.102 billion at the end of March 2002.

The encashment of $33 million bonds in the first three weeks of April raises the total amount of the bonds encashed since October last to $317 million. At end-September 2001, dollar bonds worth $1.386 billion were in circulation. But on April 20, 2002, the amount fell to $1.069 billion.

Senior bankers say $317 million is the sum of all the three types of bonds i.e. of three-year, five-year and seven-year maturity encashed between October 2001 and April 20, 2002, but they cannot give the break-up.

Bankers link faster encashment of dollar bonds since October last year to the post-September 11 scenario. They also attribute it to the falling LIBOR (London inter-bank offered rates) during the said period as the rates of profit on the bonds are linked with LIBOR.

Some bankers say what else prompted people to redeem the US dollar bonds instead of rolling them over is that the bullish stock and real estate markets have provided them an opportunity of alternate investment.

The pace of encashment picked up after the events of September 11 that eventually led to faster inflow of foreign exchange into Pakistan. This in turn brought the official and open market exchange rates at par.

As foreign exchange inflows picked up in the wake of September 11 events thereby eliminating the huge gap between official and open market exchange rates people stopped redeeming the bonds to buy dollars from kerb.

The bond holders rather found it more profitable to redeem the bonds on maturity in rupee and get five per cent premium announced on August 11.

On August 11, 2001 Pakistan had sought voluntary roll-over of more than $900 million worth of three-year special dollar bonds and it had also offered a five per cent bonus on redemption of these bonds into rupees. The twin moves were aimed at deferring the country’s foreign exchange liabilities.