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Money Week

State Bank to revive consultation process

RECORDER REVIEW

The State Bank has decided to reactivate the National Credit Consultative Council (NCCC), which has been lying dormant for sometime, as well as constitute a separate credit committee to overview the availability of credit for commerce and industry in relation to their requirements. It may be recalled that representatives of various provinces and sectors of the economy including agriculture were members of the NCCC and as such the revival / establishment of such committees would enable the State Bank to remain in touch with various chambers and interest groups and have the benefit of their views in policy formulation and decision making on an ongoing basis. This would provide the necessary input to the credit planning exercise of the State Bank and deflect some of the criticism often made by the users of credit on the monetary policy.

During the week ended 29th January, 2000, money supply was provisionally estimated to have increased by Rs. 0.8 billion to Rs. 1306.3 billion as against the fall of Rs. 4.0 billion in the preceding week. The increase emanated from the expansionary impact of the private and foreign sectors offset to a large extent by the contractionary influence of the government sector. Component-wise, deposit money went up by Rs. 8.9 billion while currency in circulation declined by Rs. 8.1 billion during the week.

During the year so far, money supply was estimated to have gone up by Rs. 24.3 billion or 1.90 percent.

Total assets / liabilities in the issue department of the State Bank came down further by Rs. 8.2 billion to Rs. 362.5 billion. Notes in circulation, on the liabilities side, fell by an equal magnitude to Rs. 362.4 billion. On the assets side, Government of Pakistan securities declined sharply by Rs. 12.3 billion to Rs. 250.2 billion, neutralised to some extent by an increase of Rs. 4.1 billion to Rs. 66.6 billion in approved foreign exchange. Gold coins and bullion, however, continued to remain unchanged at Rs. 27.7 billion.

In the banking department of the State Bank, total assets / liabilities went up by Rs. 3.1 billion to Rs. 534.8 billion. On the assets side, investment in government securities and loans and advances to scheduled banks for agriculture sector rose by Rs. 6.6 billion and Rs. 0.9 billion to Rs. 236.6 billion and Rs. 49.4 billion respectively. On the other hand, balances held outside Pakistan in approved foreign exchange declined by Rs. 4.5 billion to Rs. 13.0 billion. Other items, however, depicted only minor deviations during the week. On the liabilities side, items recording increase were deposits of Federal Government (+ Rs. 1.8 billion), banks (+ Rs. 0.3 billion), and others (+ Rs. 0.4 billion) and other liabilities (+ Rs. 1.6 billion). Deposits of provincial governments, on the other hand, declined by Rs. 0.6 billion to Rs. 6.3 billion during the week.

Total assets / liabilities of the scheduled banks rose by Rs. 3.1 billion to Rs. 1688.1 billion. Items depicting increase on the assets side were foreign currency balances with banks abroad (+ Rs. 0.8 billion), investment in central government securities (+ Rs. 0.8 billion) and treasury bills (+ Rs. 2.1 billion and other investment (+ Rs. 1.0 billion). On the other hand, other assets came down by Rs. 3.2 billion to Rs. 219.6 billion.

Total demand and time liabilities of the scheduled banks went up by Rs. 9.9 billion to Rs. 1136.7 billion. Both demand deposits (general) and time deposits (general) increased by Rs. 5.8 billion and Rs. 1.7 billion to Rs. 451.9 billion and Rs. 619.0 billion respectively. Borrowings from State Bank also rose by Rs. 0.7 billion to Rs. 149.5 billion. Other liabilities and capital (paid up) and reserves, however, declined by Rs. 4.3 billion and Rs. 1.0 billion to Rs. 266.6 billion and Rs. 79.5 billion respectively.

Bank credit to the private sector again rose marginally by Rs. 0.2 billion to Rs. 773.3 billion as compared with the increase of Rs. 0.3 billion in the previous week. Earning assets showed a much larger expansion of Rs. 4.1 billion to Rs. 1129.6 billion due to increase in the holding of government paper.

Liquid foreign exchange reserves of the country rose further by $ 7.7 million to $ 1552.3 million compared with the increase of $ 56.0 million in the preceding week. Free market rate of the rupee deteriorated slightly from Rs. 53.95 and Rs. 54.00 to a dollar for buying and selling respectively to Rs. 54.00 and Rs. 54.05 on 29th January. The deterioration was in response to a substantial improvement in the dollar parity in the international market during the week. Inter-bank floating rate of the rupee and authorized dealers' exchange rate (selling) for currency notes, however, continued to remain unchanged at Rs. 51.90 and Rs. 52.68 to a dollar.

Money market remained easy during the week with the call rate fluctuating at around 6 percent per annum throughout the week due to comfortable liquidity position of most of the banks. An amount of Rs 17.1 billion was offered for the purchase of government of Pakistan Market Treasury Bills but the State Bank accepted only Rs 2.9 billion; Rs. 0.2 billion for 3 months at a cut-off yield of 8.01 percent, Rs. 2.2 billion for 6 months at a cut-off yield of 8.49 percent and Rs. 0.4 billion for 12 months at a cut-off yield of 8.99 percent.