960419

Forex reserves up Rs 3.261bn to $ 1.585bn,

notes issued rise by Rs 3,289m

RECORDER REVIEW

KARACHI: The foreign exchange reserves during the week depicted a sharp improvement of Rs 3.261 billion and settled at Rs 54.934 billion (1.585 billion dollars).

As per the weekly statement of affairs of the State Bank dated April 11, 1996, the notes issued in the country for the second week in a row rose by yet another Rs 3,289 million and reached at Rs 262,638 million. At the same time, notes in circulation increased from Rs 259,098 million and settled at Rs 262,381 million.

Government of Pakistan Securities within the country depicted a small rise of Rs 39 million to Rs 172,117 million from the previous week's level of Rs 172,078 million.

The approved foreign exchange registered an improvement of Rs 3,283 million to Rs 49,938 million. In the meantime, the cash and short-term securities held outside the country for the second consecutive week dropped massively by Rs 7,252 million to Rs 4,996 million.

SDRs held with the IMF stood unchanged at Rs 300 million. Advances to the main economic sector, agriculture, showed a nominal rise of Rs 50 million to Rs 42,556 million. Loans to industrial sector slipped to Rs 14,969 million from Rs 14,986 million.

The export sector moved down by Rs 38 million to Rs 32,466 million, while housing and treasury bills sectors remained glued to the preceding week's level of Rs 18,698 million, Rs 6,496 million and Rs 3,030 million respectively.

Banks investment in government securities changed its trend and depicted a substantial decline of Rs 2,060 million from Rs 70,246 million.

Deposits of the Federal Government with the bank skidded by Rs 6,682 million to Rs 12,428 million, while those of commercial banks and the provincial governments settled at Rs 74,401 million and Rs 4,144 million, indicating a drop of Rs 173 million and Rs 1,653 million respectively.

SCHEDULED BANKS

General Demand and Time Deposits of scheduled banks registered a sharp rise of Rs 10,513 million, and finished at Rs 720,495 million. With this rise, the aggregate of these deposits reached at Rs 164,971 million.

Their advance to trade and industry maintained its rising tempo and denoted a rise of Rs 3,786 million and reached at Rs 460,506 million from Rs 456,720 million.

Import bills purchased and discounted by the scheduled banks increased marginally to Rs 13,706 million, going up by Rs 58 million. Foreign bills (excluding import bills) P&D went down to Rs 44,201 million from Rs 44,255 million.

Their borrowings from State Bank pushed up by Rs 368 million and finished at Rs 88,192 million from Rs 87,824 million, while their balances with the institutions increased significantly to Rs 88,584 million, i.e. a rise of Rs 5,440 million.

Their borrowings from banks abroad showed a fall of Rs 182 million to Rs 14,012 million, while those of foreign currency balances registered a decline of Rs 470 million to Rs 15,551 million. Foreign currency deposits held by these banks settled at Rs 3,678 million, indicating an increase of Rs 143 million.

Their investments in Central Securities moved up to Rs 107,145 million from Rs 103,585 million. The investments made in treasury bills showed a small improvement of Rs 878 million and in other investments Rs 50 million, thus accounts of both these heads for the week and finished at Rs 109,418 million and Rs 17,409 million respectively.

According to KASB review, short-term rates continued to remain unstable throughout the week. The trading range remained between 12 percent and 16 percent. The market continued to close short with banks seen tapping the repo discount for respite. The prevailing shortage of funds saw a bullish interest rate trend on Wednesday, the day of the OMO. Rates touched the 16 percent level, but later fell back to 13 percent at the end of the day. Due to a city-wide strike on Thursday, banks also covered their position for four days. With the outflow of approximately Rs 800 million due to the FIB auction settlement banks anticipated the 17 percent overnight levels on Thursday. However this was not the case and the lowest levels of the week, 10 percent to 13 percent, were witnessed. No special OMOs were witnessed this week and only Rs 100 million was picked up by way of outright selling the 4th April T-Bill. The cut-off yield remained unchanged at 12.85 percent.

Term repo activity picked up considerably in the earlier parts of the week which saw rates escalating. Banks mostly were witnessed focusing in one and three months tenors. Trades continued to be seen mostly against bills. Lending in one month was in evidence at consistent levels of 12-70 percent and 12-80 percent and nominal amounts were also traded between this band. The longer tenor also generated interest and bids and offers were quoted at around 12-80 percent and 13 percent respectively, but trades remained scarce. Six months levels were also hard to come by.

The SBP this week conducted a FIB auction in which a total amount of Rs 719 million was picked up with the cut-off level being at par. Most of the bids were received in the 5-year issue where Rs 500 million was accepted followed by the 10-year and 3-year issues in which Rs 129 million and 90 million respectively. The FIB secondary market, on the other hand, remained in the dormant state as no major activity was conducted. The hike in funding costs for banks holding these securities has significantly reduced spreads.

Interbank conditions are expected to remain somewhat the same with overnight levels remaining above the double mark. Nominal inflows due to FIB coupon maturities next week are not expected to bring any major change to the present interest rate scenario.