August 28, 2002	Wednesday	Jamadi-us-Saani 18,1423

KARACHI, Aug 27: A three-member team of State Bank officials has left for Dubai to explore the possibility of investing part of its foreign exchange reserves in fixed income securities.

Bankers close to the SBP told Dawn that the team, headed by deputy governor Tawfiq A. Husain, would meet senior fund managers there. Foreign exchange adviser of the State Bank Zafar M. Shaikh and executive director Farhat Saeed are the other two members of the team. The team will return to Pakistan by the end of this week.

The fund managers would brief the delegation on how gainfully Pakistan can invest in the world market some $750 million out of its $7.3 billion liquid forex reserves.

The board of directors of State Bank has already allowed the management to invest this amount initially in the US-dollar denominated fixed income government bonds. The SBP officials are expected to receive elaborate briefings by the fund managers in Dubai on the number and nature of investment options available to Pakistan. After building the foreign exchange reserves from $3.2 billion a year ago to $7.3 billion Pakistan wants to invest part of it in fully secured fixed income securities as part of better reserve management. In fiscal year July-June 200-01 the central bank had booked a huge Rs49 billion foreign exchange loss for a host of reasons, including a somewhat orthodox reserve management.

Bankers close to the SBP say the fund managers in Dubai are likely to brief the central bankers about (i) the countries whose fixed income securities can be chosen for investment (ii) the nature of various debt and equity bonds in which Pakistan can put its money and (iii) the yield curve of these securities.

On top of all the fund managers will also identify the safest modes of investment with instant accessibility as the SBP has decided to invest $750 million only in such bonds that guarantee premature withdrawals. That makes sense in case of Pakistan whose forex reserves buildup is seen by many as one time-reward for its support to the US in its “war against terrorism in Afghanistan.”

Bankers close to the SBP say the team would be discussing with the fund managers the possibility of making investment in such fixed income securities that can offer repo facility up to 95 per cent.

This means that the SBP will be able to use these securities for raising foreign currency loans worth up to 95 per cent of their value — when Pakistan needs foreign exchange.