Pakistan not facing balance of payments difficulties: SBP governor

[Naveed Yaseen]

Says IFIs to release loans soon

Friday, March 13, 2009
By Mehtab Haider

ISLAMABAD: State Bank of Pakistan Governor Saleem Raza said on Thursday Pakistan was not facing any balance of payments (BoP) difficulties during the current fiscal year as the IMF, World Bank and Asian Development Bank would soon release their loans for the country.

He also said the central bank would review discount rates in the next couple of months as Karachi Interbank Offered Rates (KIBOR) witnessed 3 per cent decline and it was hoped that the interest rates would be reviewed downward if the core inflation decreased. “There is no question of any rescheduling on paying foreign debt and liabilities as the country made payments on maturity of Eurobond well on time,” the SBP governor said while talking to reporters after the day long roundtable conference on Microfinance Intuitions (MFI) arranged by the Planning Commission (PC), here on Thursday.

To a question regarding the foreign currency reserves target for June 30 envisaged by the IMF, he said the country’s foreign currency reserves were $1.5 billion on higher side compared to the envisaged target till March 2009.

“We have almost half a billion dollar less than the envisaged target of foreign currency reserves till June 30,” he added. According to the latest data of the SBP on Thursday, the foreign currency reserves stood at $10.052 billion on March 7.

Without sharing the exact target for June 30, the SBP governor said the foreign currency reserves would be increased to over $10 billion.

Raza said in the same breath that the country would soon receive $840 million in the second tranche from the IMF after its board approval. The other multilateral agencies such as the WB and ADB would also extend their loans soon so there is no financing gap on external front for the ongoing fiscal year.

When he was asked about any possibility for decreasing discount rates by the end of the current month, the SBP governor was non-committal on this issue and he stated that although the inflationary trend witnessed some declining trends in recent months but the CPI-based inflation pushed up because of escalation in prices of food items. The core inflation is not coming down but the SBP will review discount rates in next couple of months, he said.

Referring to KIBOR, he said it witnessed 3 per cent decline and it was hoped that overall interest rates for borrowers would also be reduced. To another query about existing spread between lending and deposits rates, he said the banks used to charge more on those products where there was a risk of default such as credit card and consumer financing.

He also said the banking sector was not facing any liquidity crunch as bad loans of consumer financing as well as the textile sector put some pressures but their overall situation was quite satisfactory.

Regarding the finance ministry’s intervention into the monetary stance and about autonomy of the central bank, the SBP governor said both the finance ministry and the central bank moved hand in hand and the finance ministry could express its viewpoint on monetary stance which could not be termed contrary to the SBP.

http://www.thenews.com.pk/daily_detail.asp?id=166935