KARACHI, Jan 18: The State Bank of Pakistan is waiting for the right time to decide about how much of the country’s foreign exchange reserves should be kept in euro.

“We are watching the currency market,” said Foreign Exchange Advisor to SBP Zafar M. Shaikh when asked whether the SBP plans to transfer part of its dollar-denominated reserves into euros.

“We cannot afford to lose money...We would go for euros when we are sure that the switching over would not incur us any loss.”

Shaikh was referring to the decision of some central banks including that of Hong Kong that converted part of their reserve into the new currency after the launch of the euro accounts in 1999. These banks had bought euro at a very high price and are now facing losses as the new currency has lost much of its charm in the past two years.

Whereas only a limited number of central banks had dared to keep part of their reserves in euro accounts between 1999-2001, several others including the central bank of China are now doing this. These central banks say they are doing this to diversify reserves currency base.

“We also believe in diversifying the reserve currency base,” says Zafar Shaikh. “But in doing so we will follow the rules of prudent reserve management and take care of our profitability.”

Most of Pakistan’s $4.8 billion liquid reserves is denominated in US dollars. Recently the central bank has taken measures to practice prudent reserve management and is looking for better avenues to earn more profits by investing the reserve money in the international market.

The State Bank, like other central banks of the world, allowed inter-bank dealings in euro from January 1999. Since then the common currency of 11 European nations has been a reality for bankers and businessmen.

But the common man here heard of euro on 1st of January this year when euro notes and coins came into circulation. People are just eager to see the new currency notes and coins but these are nowhere to find. Most banks here including foreign banks have so far not brought in euro notes and coins. The only bank that is reported to have imported the new currency is Deutsche bank. No senior official of the bank was available to say how much worth of new currency the bank has brought in on its own, but bankers say the amount is not big.

The SBP has also not imported new currency. “Why should we import euro notes...Banks can do so on their own,” says Zafar Shaikh.

Some foreign banks have reported cash transactions with few clients who brought in meagre amounts of euro on their return from European countries in the past two weeks.

In the open currency market too the new currency is yet to make its presence felt.

Money changers say a small amount of euro has trickled in from the European countries through tourists and overseas Pakistanis who have come back home to spend some time here. “I think not more than 100,000 euros are in circulation in the open market,” said president of Forex Association of Pakistan Malik Muhammad Bostan.

So far the rupee-euro parity is concerned banks continue to fix it through cross exchange rate system. That is the dollar- euro parity is translated in terms of rupee-euro parity. Money changers do the same thing.