May 15, 2008	Thursday	Jamadi-ul-Awwal 9, 1429

KARACHI, May 14: Banks have increased by almost four times the difference in rates being given by them on dollars received as export proceeds and on opening letters of credit for imports during the current month, much to the anger of businessmen, who are already complaining of mounting cost of doing business in Pakistan.

“We are being paid Rs67 for a dollar on our export proceeds and are being asked to give Rs69 for a dollar to open letter of credit for import,” Mr Ikhtiar Baig, a member of Finance and Bank Credit standing committee of the Federation of Pakistan Chambers of Commerce and Industry, complained.

“Normally, the difference between the buying and selling price of a dollar was within a band of 50 to 60 paisa,” he said. His explanation of expanding this difference in buying and selling rate of dollar was banks’ taking advantage of unusual times this month for pushing up their profits.

“Imagine, banks income from this commission as total volume of international trade is close to about $50 billion in a year,” a businessman pointed out who said that there should be no doubt on Pakistani banks ability to take full advantage of an unusual situation and maximise their incomes.

Bankers say that a considerable drawdown on Pakistan’s foreign exchange reserves in last few weeks has given foreign banks an opportunity to demand extra guarantee on the letters of credit being lodged for imports and hence the expansion in difference in rates of buying and selling of dollar.

“Pakistan’s foreign exchange reserves were enough for more than 30 weeks import bill sometimes back but now have come down to a level when these would hardly be able to finance 20 weeks import bill,” explained a senior banker in the trade section of a bank.

Foreign bankers, they say, are not unaware of the unusual conditions in Pakistan’s foreign exchange market when dollar’s parity value in inter bank and kerb went high.

Hardly five days ago on May 9, State Bank Governor Dr Shamshad Akhtar had to issue a statement to assure bankers and foreign exchange dealers that foreign exchange inflows to the tune of $3 billion to $3.5 billion are expected to come in the banking system in the short to medium term.

“These expected flows coupled with joint efforts of the SBP and commercial banks, will further stabilise the Pakistani rupee parity vis-à-vis dollar and will calm down foreign exchange markets,’’ she added.

She had also given an assurance in a meeting with heads of commercial banks, as reported by an official press release of the SBP. “Current rupee volatility is not reflective of the macro-economic fundamentals,” the central bank governor had observed on the wild fluctuation of rupee-dollar parity in the kerb followed by same phenomenon in inter-bank, which was more disturbing.

The details of $3.5 billion lined up by the short-lived finance minister Ishaq Dar is expectation of $2.1 billion from multilateral banks, $500 million from friendly countries most likely from China, $200 million for earthquake relief, $100 million from British DFID, $700 million from MCB Bank’s stake sale to a Malaysian bank and $100 million from Barclays bank plus a lot much from private sector GDRs and other regular sources.

“China has recently suffered heavily from earthquake causing damages and losses that are still to be estimated,” a banker said and wondered whether it would be appropriate to expect flow of promised $500 million assistance from that country.