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Money Week

Rupee comes under pressure

Recorder Review

Pak rupee which was quoted at around Rs. 54.00 to a dollar during the last one month in the market came under pressure during the week ended 12th February, 2000. The weakness of the rupee seems to have emanated from several factors including the continued strength of the US dollar in the international market, disappointing trade data for the month of January and a drop in the rate of return on government saving schemes. However, since authorized dealers' rate is strictly regulated and controlled by the State Bank it continued to be quoted unchanged despite clear signals from the market for readjustment.

During the week ended 12th February, 2000, money supply was provisionally estimated to have increased by Rs. 5.8 billion to Rs. 1312.6 billion as compared with the rise of Rs. 4.3 billion in the preceding week. The increase was probably attributable to the expansionary impact of other items. Component-wise, currency in circulation and deposit money went up by Rs. 2.7 billion and Rs. 3.1 billion respectively.

During the year so far, money supply was estimated to have gone up by Rs. 30.6 billion or 2.39 percent.

Total assets / liabilities in the issue department of the State Bank rose by Rs. 2.4 billion to Rs. 365.8 billion. Notes in circulation, on the liabilities side, went up by Rs. 2.3 billion to Rs. 365.6 billion. On the assets side, government of Pakistan securities increased by Rs. 2.7 billion to Rs. 256.6 billion while approved foreign exchange declined by Rs. 0.2 billion to Rs. 63.5 billion. 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 came down by Rs. 5.2 billion to Rs. 534.9 billion. Investment in government securities was the major item recording a decline of Rs. 6.5 billion to Rs. 245.0 billion followed by loans and advances to scheduled banks for export sector (- Rs. 0.3 billion). On the other hand, balances held outside Pakistan in approved foreign exchange, government debtor balances and other assets rose by Rs. 0.7 billion, Rs. 0.6 billion and Rs. 0.9 billion to Rs. 13.9 billion, Rs. 5.1 billion and Rs. 30.9 billion respectively. On the liabilities side, deposits of provincial governments and banks fell by Rs. 2.5 billion and Rs. 5.4 billion to Rs. 8.4 billion and Rs. 85.2 billion while deposits of federal government and other liabilities increased by Rs. 1.9 billion and Rs. 0.6 billion to Rs. 5.4 billion and Rs. 113.7 billion respectively during the week.

Total assets / liabilities of the scheduled banks rose by Rs. 4.3 billion to Rs. 1696.6 billion. On the assets side, investment in treasury bills, other assets and foreign currency balances with banks abroad went up by Rs. 5.7 billion, Rs. 9.5 billion and Rs. 0.5 billion to Rs. 131.9 billion, Rs. 227.0 billion and Rs. 42.3 billion respectively. On the other hand, items recording declines included cash in tills (- Rs. 0.4 billion), balances with State Bank (- Rs. 5.8 billion), advances other than those to banks (- Rs. 1.8 billion) and investment in central government securities (- Rs. 4.6 billion).

Total demand and time liabilities of scheduled banks rose by Rs. 2.1 billion to Rs. 1141.8 billion. Demand deposits (general) went up by Rs. 2.8 billion to Rs. 455.0 billion while time deposits (general) fell by Rs. 0.6 billion to Rs. 621.8 billion. Other liabilities also went up by Rs. 1.2 billion to Rs. 273.1 billion. On the other hand, borrowings from State Bank came down by Rs. 0.7 billion to Rs. 146.8 billion.

Bank credit to the private sector including for autonomous bodies and commodity operations declined by Rs 2.0 billion to Rs. 771.0 billion as compared with the contraction of Rs. 0.3 billion in the previous week. Earning assets of the scheduled banks, however, registered a marginal increase of Rs. 0.1 billion to Rs. 1132.4 billion due to substantial increase in the holdings of treasury bills.

Foreign exchange reserves of the country remained unchanged at last week's end level of $ 1498.4 million as compared with substantial fall of $ 54.0 million in the previous week. Free market rate of the rupee deteriorated from Rs. 54.10 and Rs. 54.13 per dollar for buying and selling respectively at the close of last week to Rs. 54.24 and Rs. 54.28 by 12th February, 2000. Inter-bank floating rate 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 throughout the week.

Conditions in the money market remained easy during the week. The call rate dropped from 5.00 - 5.75 percent per annum to less than 2 percent by the middle of the week but rose again to 5.50 percent by 12th February. Tenders for the sale of MTBs attracted a huge amount of Rs. 35.2 billion but State Bank accepted only Rs. 9.0 billion; Rs. 6.7 billion for 3 months at 7.74 percent, Rs. 2.3 billion for 6 months at 7.99 percent and a nominal amount of Rs. 50 million for 12 months at 8.44 percent.