August 9, 2002	Friday	Jamadi-ul-Awwal 29,1423

KARACHI, Aug 8: The State Bank will place $750 million or 10 per cent of its $7 billion plus foreign exchange reserves initially only in US dollar-denominated fixed income government bonds as part of its reserve management.

SBP foreign exchange adviser Zafar M. Shaikh said this at a seminar held here under the aegis of Pakistan Press Foundation.

He said the board of directors of the central bank has allowed the management to initially employ $750 million into fully secured bonds in the international market. But he would not say when exactly the State Bank would do it.

He said the central bank had been in talks with triple A rated international investment banks to outsource the job of foreign exchange reserve employment.

Zafar Shaikh said the mandate to be given to the selected bank would include cent per cent guarantee regarding accessibility to the capital meaning that the country would be free to encash the bonds prematurely if there arises a need.

He said Pakistan would also like to have repo facility against placement of funds up to 95 per cent. That means that if the country is in need of liquidity it can borrow in foreign currency against the bonds for a certain period.

Zafar Shaikh said the third key condition for outsourcing SBP reserves management is that the selected investment bank would have to make transfer of professional know-how. The selected bank would have to train SBP staff in reserve management techniques and technology.

Forex Association of Pakistan president Malik Bostan urged the SBP to allow the money changers co-exist with the foreign exchange companies that are being set up to replace them. He said Rs100 million paid-up capital required for setting up these companies was too large a sum.

President of Karachi Press Club and assistant editor of Dawn Sabihuddin Ghausi said the creation of the exchange companies — though belatedly — would help document foreign currency transfers to and from Pakistan. He stressed the need for making these companies more transparent in their operations than the money changers.