KARACHI, Jan 1: The State Bank of Pakistan has made direct purchase of $637 million from the kerb market in last six months as against $755 million in the corresponding period last year.

Claiming that this intervention of the central bank did not bring any difference in the kerb, the SBP governor said that it helped in building up the country’s foreign exchange reserve to $4.8 billion level. Of this, the SBP reserves are $3.1 billion and the remaining are $1.7 billion foreign exchange account deposits.

With increase in the flow of dollars after September 11 on account of a number of factors that has improved remittances manifold from the Pakistani expatriates Dr Ishrat forcefully defended his policy of making direct purchase from the kerb.

He disclosed that the central bank picked up $719 million from the inter-bank in last six months to keep dollar- rupee parity at a level that serves the interest of the exporters. “Importers are not happy,” he said on maintaining the present dollar-rupee parity.

“It is the inter bank rate that is a leading indicator,” the SBP governor made his point while emphasising that purchase from the surplus flow of dollar in the kerb does not make any difference.

“About two billion dollars were given to service the debt obligation and $693 million was the oil bill paid from the reserves in last six months,” he informed. Last year in the corresponding period when the reserves were low he said the State Bank has to purchase dollars from the kerb to make oil bill payment.

“Another two billion dollar payment to service debt will be made in next six months from the reserves,” he said.

Debt servicing last year involved a payment of 4 billion dollars to multilateral agencies loans, commercial credits and private non-guaranteed loans.

“No more swapping or re-rolling of foreign exchange loans,” he answered when a journalist asked if the banks were again re- rolling the foreign exchange loans of the banks.

Since April last year, he said the commercial banks have been given full charge of their foreign exchange account deposits. These deposits are no more with the central bank and every commercial bank is allowed to invest within the framework of prudential regulations.

Dr Ishrat said that if the State Bank would have depended on commercial borrowing for servicing debts than Pakistan’s stock of debt would have been $42 billion with an additional impact of $300 million every year.

With a premium payment of Rs2 to Rs2.50 a dollar the central bank has managed to build up reserve that has given a lot of confidence.

He said the it was not the stock of debt that is a problem for the country but it is “burden of debt servicing” which makes the difference.

This debt servicing was almost 70 per cent of the country’s foreign exchange earning which he declared “we want to bring it down to a safe level of 30 to 35 per cent of foreign exchange earnings in next three years.”

“We are getting new loans from the World Bank, Asian Development Bank and other sources but on softer terms,” he said. These soft terms pertain to low rate of return, longer repayment period and a grace period.

Answering a question, he said the cash flow impact of the Paris Club rescheduling is $1.1 billion a year and $3 billion.