PRO 16-12-2012_Layout 1 12/16/2012 1:35 AM Page 1
Sunday, 16 December, 2012
Rupee-dollaR paRIty
Importers pushed towards forward booking dollar at Rs 101! KARACHI
T
ISMAIL DILAWAR
He value of the rupee is touching the lowest ebb against the dollar in the history of Pakistan, apparently, because of the country’s fast depleting foreign exchange reserves. According to official data, the country held dollar reserves of $ 13.37 billion up to the week that ended on Dec 7. Of this total, over $ 4.8 billion belong to the private banks with the State Bank left with only $ 8.5 billion in hand. This downward trend in Pakistan’s forex reserves is said to be a major reason for a persistent devaluation of rupee against the greenback that appreciated by over Rs 3 against the Pakistani currency during last three months. Friday saw the rupee trading at the lowest level of Rs 98.40 versus dollar. The dealers in the local money market, however, think otherwise and point finger at the profit-crazy bankers while assigning major reasons to the ongoing negative balance in the rupee-dollar parity. Talking to Pakistan Today, the money exchangers claimed that the banks had panicked the importers by creating rumors in the market. The rumors, the exchangers alleged, include the spread of misleading forecasts that the dollar was set to appreciate further against the rupee owing to Pakistan’s fast depleting forex reserves that are being drained out to the International Monetary Fund (IMF) in the face of heavy debt repayments. “Resultantly, the panicked importers are rushing to the banks for forward booking of the dollar for six months,” said Malik Bostan of Forex Association of Pakistan (FAP). The importers, Bostan said, were placing advance orders with the banks for the greenback at a rate as high as Rs 101. “The banking cartels take benefit out of forward booking,” he claimed. Such speculations whereas have allegedly pushed the importers towards forward booking of the US currency, in which they have to clear their import bills, the same is said to have led to hoarding of the greenback. As claimed by a local currency dealer, Shahid Usman, who accused the banks of sitting over a heavy chunk of dollars, thus creating a shortage in the inter-bank and open market. “The banks say we have no dollars available as the State Bank is not providing us with the same,” the dealer said. Usman seconded the impression that the banks were forcing the importers towards forward booking by spreading rumors. However, when contacted a senior
banker rejected the allegations as “baseless” and said the dollar’s appreciation was because of the hype created by the market sentiments coupled with reports of Islamabad’s intention to seek a fresh bailout package from the IMF. “Rupee is weakening because the dollar is strengthening,” he said. “The same had also happened in 2008 when Pakistan had sought the IMF’s SBA package. The dollar had then shot up to Rs 84 from Rs 61,” the banker argued. The banker opines that the present PPP-led government would not go for a fresh IMF loan on the back of positives like Balance of Payment showing a surplus in the first five months and improved inflow of worker remittances. The FAP chairman Bostan, how-
ever, insisted that such negatives would keep pressure mounting on the already volatile rupee. “The government must interfere and the State Bank should come up with a clear statement on the status of its reserves,” the money dealer proposed. Also, he demanded of the economic mangers to take urgent steps towards the realization of foreign financing pledged or budgeted under various heads. This, he said, included $ 600 million under Coalition Support Fund, $ 800 million proceeds against the PTCL privatization and foreign inflows to come through the issuance of third generation licenses to the telecom sector. Bostan also urged the government to press the IMF for rescheduling of the debt repayments which, he claimed, were being repaid at a much higher rate of 4.5 percent against the Fund’s international market rate of 1 percent. Despite the apparent trust deficit on the two sides, the money exchangers and bankers agree that if the remedial measures were not taken the rupee would keep losing face to the dollar and would slid down to Rs100. “If the inter-bank rates also rose on Monday the dollar would soon cross the Rs 100 mark,” said a currency dealer. A banker in one of the leading banks, however, foresees this possibility by February or March next year.
Call for freezing 5pc GST on tractors for another year LAHORE APP
Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Saturday urged the government to extend the reduced levy of 5 percent on tractors sale for another year with a view to sustain manufacturing growth which was under threat of closure due to gas supply suspension and power loadshedding. PAAPAM Vice Chairman Usman Malik said here that reduction of sales tax to 5 percent put the tractor industry and its allied hundreds of
KCCI rejects 50bps rate-cut by SBP
KARACHI STAFF REPORT
Karachi Chamber of Commerce and Industry (KCCI) Saturday expressed its dissatisfaction over the 50 basis points decrease in the discount rate by the State Bank of Pakistan on Friday. In a statement issued here Saturday, President KCCI Muhammad Haroon Agar said the business community was expecting a decrease of 100 basis points in discount rate which was also a long-withstanding demand to bring the discount rate to a single digit. He said the decrease of 50bps would not be much beneficial and urged the regulator to drastically cut down the discount rate to the level of 6 to 7 percent enabling the business community for level-playing field with the competitors in the region. The deteriorating law and order situation, energy crises and exorbitant increase in the POL prices have already slowed the pace of industrial and commercial activities as well as the economy. The high discount rate has also brought an upshot and increase in the cost of doing business, said Agar. The tightened monetary policy, he said, had also impeded the progress of private sector with adverse affects on the economy. “Due to increased discount rates, the NonPerforming Loans of banks are also increasing, therefore, the state of affairs demand government to take notice of the facts before taking decisions,” the KCCI chief said. He opined that a rate-cut to 6-7 percent would enhance in the country economic and commercial activities and would also be a ray of hope motivating the abroad shifted industrial units to come back to Pakistan. This he said would also increase the domestic and foreign investment, something the country needs the most.
vending units across the country back on track, bringing tractor rates in the reach of small landholders- a step forward in farm mechanization, maximizing per acre yield. Auto industry was again facing a steep decline in production
and any change in Sales Tax regime at this point may lead to closure of industry, he apprehended. He said auto industry appreciated the senior industry minister for continued support for automotive vendors, as on his personal persuasion, the government agreed to reduce sales tax to 5 percent from 16 percent. Usman Malik said last year's decision of government not only facilitated the tractor manufacturers and vendors attached with this sector but also gave a boost to agriculture sector. The reduced GST would continue to increase the sale of tractors and ease the problems being faced by the tractor manu f ac t u re rs and the farming community, he maintained. H e claimed that without sales tax, the local industry would produce up to 100,000 tractors that would ensure jobs for 68,000 workers, besides increasing mechanization of agricultural farms.
China lets foreign sovereigns, central banks exceed $1b investment limit China's foreign exchange regulator has removed the $1 billion limit for foreign sovereign wealth funds, central banks and monetary authorities buying Chinese assets through the Qualified Institutional Investor Programme (QFII) NEws DEsK The new regulations, published on the website of the State Administration of Foreign exchange (SAFe), did not specify a new top limit, merely that the funds can apply to invest over $1 billion. The policy is aimed at sovereign wealth funds like Qatar Holdings and the Hong Kong Monetary Authority, both of which have already been approved to invest up to $1 billion each through QFII.
SAFe will retain the right to approve or deny individual applications on a caseby-base basis. Chinese regulators have said in the past that facilitating increased foreign investment in Chinese assets will help restore confidence in China's stock markets, which have declined by over 60 percent since November 2007. But the total amount of foreign money allowed to enter the domestic stock market remains small, and the new rules do not increase it.
Combined foreign investment in China's stock market accounts for only 1 percent of total market capitalization. The overall net quota for the QFII programme remains at its current $80 billion, of which SAFe has only allocated $36 billion for use by QFII funds as of November 30. Foreign appetite for Chinese equities has shown some signs of increase in recent months, especially in Hong Kong, but the weak performance of stock-focused QFII funds - and com-
plaints about high fee structures - has dampened appetite. (GRAPHIC: Comparison of QFII fund performances in China. To drum up additional interest, Chinese regulators, including officials from the Shanghai and Shenzhen stock exchanges, went on an overseas tour in September to advocate for Chinese equities and QFII in particular. The new regulations also relax restrictions on the ability of funds to remit principal and income from investments, but made no further clarifications as to
how China will tax QFII profits, an area of enduring uncertainty for QFII investors. Chinese stock markets on Friday had their biggest single-day jump since 2009, which some analysts attributed to expectations of further relaxation of rules on foreign investment in stocks. Others, however, offered alternative explanations for the unusual jump, such as behind-thescenes share buybacks by state-owned entities trying to engineer a rebound for the end of the year.