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KARACHI, Oct 29: Official liquid foreign exchange reserves held by the State Bank fell to $9.94 billion on October 23, from about $9.967 billion a week earlier, weekly data issued by the State Bank on Friday show.
This fall in the official reserves is the second one in a row. Earlier, SBP reserves had fallen to $9.967 billion on October 16 from $10.016 billion slipping below the crucial mark of $10 billion for the first time since July.
The SBP data show that total liquid foreign exchange reserves also fell to about $12.293 billion on October 23 from $12.3 billion on October 16. Out of the $12.293 billion, $9.94 billion were held by the SBP and the remaining around $2.353 billion by the banks.
The fall in SBP reserves in two consecutive weeks indicates that the central bank can no more make strong interventions in the inter-bank market to lift the rupee without letting the reserves decline.
That is why the central bank has lately stopped making large interventions to keep the rupee artificially strong. But it continues to make timely but small interventions to check volatility in exchange rate movements. The rupee has lost 5.5 per cent value against the US dollar since July despite the SBP interventions.
PIBs sale: The State Bank will sell Rs3 billion long-term Pakistan Investment Bonds (PIBs) next month as part of the Rs11 billion planned sale of the bonds up to June 2005, the SBP announced here on Friday.
The central bank said it would sell Rs3 billion bonds in January-March 2005 and Rs5 billion bonds in April-June. The SBP would sell Rs1 billion each of three-year, five-year and 10-year PIBs on November 11.
The SBP said it would sell Rs1 billion each of these bonds also in January-March and April-June adding that in April-June it would also auction Rs1 billion each of 15-year and 20-year bonds.
The coupon rates on these bonds are six per cent for three years; 7pc for five years; 8pc for 10 years; and 9pc for 15 years and 10pc for 20 years, but effective yields are determined by demand and supply forces. Profit is paid on these bonds after every six months.
The target of Rs11 billion set for selling PIBs has surprised the market more so because these bonds could not have been sold in the first quarter of this fiscal year. The SBP had scrapped the only auction held in August to prevent a sharp increase in their yields.
Bankers said a lower-than-expected target increased trading in 10-year bonds and lowered their yields. They say a small target set for selling PIBs suggests that the government wants to avoid increasing their yields.
