Banks import dollar bills to meet panic withdrawals

[Naveed Yaseen]

KARACHI (October 10 2008): Banks have imported a big consignment of cash US dollars in order to meet a sudden surge in panic withdrawals, according to well-placed banking and government sources. Unlike prior to 1998, banks now do not surrender their forex deposits to the State Bank of Pakistan and instead keep these funds abroad with corresponding banks or their head offices in case of foreign bank branches.

The question of freezing these deposits, therefore, does not arise. Bankers expect their clients' nervousness to end in the next couple of days as they can safely meet the clients needs. Meanwhile, the Pak rupee-dollar parity on the interbank market was stable with parity moving in a short band of Rs 79 to 79.30 per US dollar.

The end of the day rate was Rs 79.10/20 and for tomorrow value Rs 79.22/23 to a dollar. The downgrading of Pakistan risk resulted in a dip of Pak Euro bond trading. The February 2009 Sukuk was at 94 cents offer with no bids. 2016 maturing bonds at 43 cents, 2017 maturing papers 39/39 cents and 30-year bond maturing in 2036 was being offered at 33 cents.

The central bank rubbished the rumour that a portion of Pakistan forex reserves was invested in either the defunct Bear Stearns or Lehman Brothers and said that the entire reserves were in liquid form. There was a surge in withdrawal of Income Funds on the first day after the freeze of equity Mutual Funds but, the situation has reportedly improved yesterday.

In the open market Pak rupee-dollar parity was between Rs 80 and 81 to a dollar and 'A; rated exchange companies had drawn only $5 million from SBP while the central bank was asking them to take additional dollars to give to 'B' rated money changers as well to keep the market stable.

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