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KARACHI, Dec 5: Pak Arab Refinery Co. (PARCO) made $54 million debt servicing and Kuwait Petroleum Co footed $12.5 million oil import bill on Wednesday. But the rupee held firm despite this huge outflow.
Bankers said the rupee finished at 60.90/60.92 per dollar down only two paisa overnight as a partly privatized bank paid $54 million to PARCO creditors abroad.
A senior official said the company remitted $54 million to Abu Dhabi in connection with a $500 million loan that it had raised last year. The public sector refinery had used the funds to set up a $886 million refinery located in Mehmoodkot (Muzaffargarh).
Bankers said what helped the banks absorbed $54 million demand without letting the rupee down, was that the bank concerned bought this amount in phases. They said the bank had been buying dollars for this payment for past several days with the permission of the State Bank.
“The SBP permission was necessary because constant buying had burst the NOP (net open position) of the bank,” said a foreign banker. Every bank is supposed to observe a limit called NOP for open buying and selling of dollars from the inter-bank market. “Technically speaking it is wrong,” remarked the banker.
No central banker was available to comment on this. But one of them said “what is more important is that the payment has been through without weakening the rupee.”
In June also, the SBP had helped PARCO in making $43 million debt servicing. The central bank had then sold more than $40 million to the bank that was out to buy dollars for making this payment.
CORPORATE PAYMENTS: PARCO is not the only company that received the State Bank support. Whenever a corporate is need of a big amount of foreign exchange for outward payment, the central bank helps it out. The reason is the inter-bank foreign exchange market is still too shallow to absorb a lumpy payment on a single day. But bankers say rising foreign exchange reserves will change the trend. This seems true. In June when the reserves stood at $3.2 billion SBP had to arrange dollars for PARCO debt servicing. But now as the reserves had reached $4.4 billion the State Bank only relaxed rules to enable a bank to buy $54 million from the market.
OIL PAYMENTS: The growing foreign exchange reserves have also helped banks foot large fuel oil import bills without weakening the rupee. Before April 2001, the SBP used to sell dollars to the banks for oil payments but it stopped the practice on the demand of the IMF. Bankers said a state-run bank made $12.5 million oil payment on behalf of Kuwait Petroleum Company on Wednesday. They said the bank purchased part of this amount from the inter-bank market but the buying did not destabilize the rupee.
