KARACHI, Oct 2: The State Bank said on Thursday that local investors are free to redeem their special dollar bonds in dollars even before they mature.

A State Bank statement said the special dollar bonds can now be redeemed before maturity in both rupees and dollars. Previously, early redemption was only allowed in rupees.

The government issued three-, five- and seven-year dollar bonds in 1998, as an alternative for depositors whose foreign currency accounts were frozen to prevent foreign exchange outflows following Pakistan’s nuclear tests. A total $1.4 billion of bonds were issued, of which around $700 million have yet to mature.

The freezing of foreign currency accounts in 1998 shook the financial sector and damaged investors’ confidence, as some of the deposits were held by expatriate Pakistanis.

Pakistan has come a long way from the 1998 crisis, with foreign exchange reserves at a record $11.2 billion. The reserves have been boosted by a surge in Western aid following the government’s alliance with the US war against terror and rising remittances from Pakistanis working overseas.— Dow Jones Newswires