December 18, 2003	Thursday	Shawwal 23, 1424

KARACHI, Dec 17: The rupee has so far lost 21 paisa to the dollar in the inter-bank market during this month on increased demand for quarter-end payments.

The rupee on Wednesday fell to 57.45 to a dollar in the inter- bank market, down 21 paisa or 0.3 per cent from December 1 level of 57.24 a dollar.

Senior bankers say the greenback has been up on higher demand due to typical quarter-end outflows. The government repays foreign loans more frequently at the end of each quarter rather than in between. Multinational companies also repatriate profits and dividends. The corporate sector as a whole services external loans at the end of each quarter or at end-June and end-December.

There is no official word about whether Pakistan has started pre-paying its $1 billion expensive loans of the multilateral lending agencies. But the finance minister has been on record saying that the government has served notices to them for this purpose.

In five months to November 2003, the dollar fell 1.1 per cent against the rupee, but it started making a modest recovery during this month on increased demand from both the government and the private sector.

The rise of the dollar in the inter-bank market has mirrored in the open market dealings as well where it has so far gained 25 paisa against the rupee this month. On Wednesday, the greenback closed at Rs57.50/Rs57.55 for spot buying and selling, down from Rs57.20/Rs57.25 on December 1. Executives of foreign exchange companies say they have so far sold at least $50 million to the banks this month despite a modest rise in demand for the dollar in the open market.

“We alone have sold $40 million,” said chief executive of H&H Exchange Company, Haji Haroon. Dawn inquiries show that a few other exchange companies combined have sold roughly $10 million. The exchange companies normally sell those dollars to the banks, which they bring in by exporting non-dollar currencies to Dubai.

Senior bankers say the dollar may further inch up in the days to come — referring to the quarter-end demand that would last till December 31.

They say whether or not the greenback would start retreating afterwards would depend chiefly on when exactly Pakistan starts prepayment of expensive external debt. They say much would also depend on the extent to which the policymakers are willing to support the exporters by keeping the dollar stable. Pakistan’s 90 per cent exports are priced in dollar.

The reason why the recent fall in the dollar value against major world currencies has not reflected in its health in the local inter-bank market is that Pakistan’s 83 per cent imports are also dollar-denominated. And the country runs a trade deficit of roughly one billion dollars a year. On top of all, Pakistan is indebted with $33 billion external debts the servicing of which claims more than $3 billion a year.

Besides, the central bank has been keeping the dollar stable to benefit the exporters by mopping up excessive inflows from the inter-bank market. This is also necessary for efficient liquidity management within the banking system.