KARACHI, Dec 12: Wheat, the ‘golden devil’, which inflicted the common men’s economy and turned into a real challenge for the government to bring its prices under control, attracted State Bank to play its role.

The State Bank on Wednesday came out with a circular to stop further hoarding of the commodity and put a cork on any option for availability of liquidity to black markets.

The State Bank in the beginning of this year allowed banks to go for lending to the private sector in wheat procurement and the lending was restricted only for wheat procurement season 2007.

However, a false estimate about total wheat production resulted in the export of the commodity.

Initially, the government had allowed export of wheat but the low yield of the crop suddenly pushed up wheat prices and export was banned. Exporters sent half a million tons of wheat abroad.

The liquidity provided by the banks to the private sector for wheat procurement was misused, which resulted in wheat hoarding.

The State Bank assured that loans provided to the private sector would be for procurement of indigenous wheat only and was repayable on or before Jan 31, 2008 positively.

Now the State Bank said the loans given for procurement of wheat should not be rolled over, a measure to siphon off liquidity for procurement of wheat.

“Banks are advised to ensure that funds provided under wheat financing to private sector are not rolled over and are adjusted as per terms and conditions of loans on or before Jan 31, 2008,” said the SBP circular issued on Wednesday.

Bankers said they have no instructions from the State Bank for fresh lending to the privates sector for wheat crops of 2008.

“Lending for fresh wheat crops is not possible especially when there are clear signs that the fresh lending would be used for hoarding and speculation in the commodity prices,” said a local banker.

The government has recently lifted ban on wheat export with the imposition of 35 per cent duty on it which again requires liquidity to do this business.

The Pakistan Flour Mills Association says the export of wheat even after imposition of 35 per cent duty is profitable. Exporters said they would save up to $100 per ton.

President Musharraf reportedly said on Tuesday that wheat prices would be increased as commodity was still cheaper in Pakistan compared to international prices.

However, it was surprising for most of the Pakistanis whose income were much lower than the ‘international standard’ but they would have to buy commodity at international rates.

Wheat flour prices have already witnessed a tidal increase since the beginning of this year. The wheat flour prices went up by 46 per cent since January 2007.

Both the government and the State Bank hold food price hike responsible for the escalation of inflation which experts believe could be in double digit till the end of the current fiscal. Further wheat prices would simply add more to the inflation.