July 15, 2007	Sunday	Jamadi-us-Sani 29, 1428

KARACHI, July 14: The SBP decision of shifting 30pc (around $2.3bn) oil import bill payment to the private sector did not generate much activity in the inter-bank market on Saturday as the dollar remained stable in the absence of massive demand.

In a major move the central bank on Wednesday had shifted the payment of 20-30 per cent oil import bill, effective from Friday (July 13), to the private sector.

Currency dealers in the inter-bank market said no immediate impact of the SBP decision was felt as no change was recorded in the exchange rates of dollar neither the demand was high.

The currency dealers and experts said the impact of the decision was possible in the coming weeks but the market was big enough to absorb the outflows of like $2.3 billion.

“In fact the dollar remained below the average prices against the rupee for last three days and the SBP decision did not even push it up to any significant level,” said Aamir Shakeel, a currency dealer.

He said the US dollar moved in the range of Rs60.36 to 60.38. Three days before it was at Rs60.41 but it dropped the same day to Rs60.38.

The State Bank said it had taken this decision in the wake of high inflows of foreign exchange which had caused excess liquidity and pushed reserve money very high resulting in high inflation.

“The State Bank has been purchasing dollars from the inter-bank market for making payments for oil imports. Thus it will not create any major impact,” said another currency dealer, adding that purchasing of dollar by the private sector could slightly bring some speculation in the exchange rates.

The SBP had started making payment of oil import bill from November 2004, before this the private sector, being sole importer of the POL products, was buying dollars from the inter-bank market which provided opportunity to the speculators to exploit the dollar demand.

“Now the situation is changed. Market is flooded with US dollars and there is no shortage which could be exploited by the speculators,” said the currency dealer.

He said the SBP could offload the whole burden of oil payments and that would not hamper the dollar prices.

The SBP has chalked out a plan to get rid of the oil bills’ payment by shifting the responsibility to the private sector gradually.

However, analysts said the State Bank should adopt cautious approach in view of the prevailing political crisis which could produce some unwanted situation that may create serious problems for the country.

They said the SBP should not ignore the very fact that trade deficit was very high and any obstacle on exports front could further widen it.