http://www.dailytimes.com.pk/default.asp?p...7-3-2006_pg7_19


Monday, March 27, 2006

Pakistan’s forex reserves reaching $14 billion

By Hamid Waleed

LAHORE: Pakistan’s foreign exchange reserves will reach $14 billion with money generated from 10 and 30-years Sovereign Bonds, said Adviser to Prime Minister on Finance Dr Salman Shah told reporters on Sunday.

Earlier, addressing a press conference at the State Bank of Pakistan’s Lahore office, Salman Shah said, “Subscription of Sovereign Bonds by leading asset management companies in the US and the UK shows investors’ confidence in Pakistan’s economic and political stability.”

He said a team headed by the State Bank governor focused on the Far Eastern and European markets, and another team headed jointly by him and Dr Ashfaque Hasan Khan focused on the North American markets.

The two teams organised road shows to attracting $2 billion in investment, he said. “10-year bonds earned $1.3 billion and 30-year bonds fetched $700 million in subscriptions.”

Dr Ashfaque said 31 percent of the 10-year bond investors were from the US, 45 percent from Europe and 24 percent from the Middle East and Far East, and 32 percent investors of 30-year bonds were from the US, 42 percent from Europe and 26 percent from Middle East and Far East.

He said 50 percent of the buyers of 10-year bonds were asset managers, 28 percent were banks, 13 percent were insurance companies and 10 percent were from retail, while 50 percent of buyers of 30-year bonds were asset managers, 27 percent were banks, 18 percent were insurance companies and 5 percent buyers were from retail. The bonds were listed in Luxembourg.

He said the government was planning 15, 20 and 25-year investment instruments as well.

Dr Salman Shah said this would send a positive signal to investors and would also facilitate the inflow of funds for mega projects in the near future.

Pakistan is likely to achieve a landmark $3 billion foreign investment this year according to government estimates.




http://www.brecorder.com/index.php?id=4032...&term=&supDate=



'$800 million investment bonds by month-end'

JALIL HASAN AKHTAR


LAHORE (March 27 2006): Pakistan will issue $800 million valued investment bonds by the end of this month against the subscription of $2 billion. The settlement of this bond would be under T+ 5 formula. Dr Salman Shah, Finance and Economic Advisor to Prime Minister, addressing a press conference at the State Bank premises here said on Sunday.

He was accompanied by Dr Ashfaq, Chief Economist, Ministry of Finance.

Dr Shah said that out of total subscription of Investment Bonds of $2 billion, acceptance of Pakistan is that of $500 million for 10 year and $300 million for 30-year period.

He said that marketing of the bonds had been done under US law 144A. He said: "We have tapped American market after 20 years." In issuance of bonds, he said, all efforts had been made to cover yield cure.

He said of total distribution of bonds for 10-year period was US 31percent; Europe 45 percent; and Asia 24 percent. For 30-year period bond, he said, this distribution remained US 32 percent; Europe 42 percent; and Asia 26 percent. He said that investors' distribution of the 10-year bond remained as Asset Managers 49 percent; Banks 28 percent; Insurance 13 percent; and Retail 10 percent.

For 30-year bond, he said, this ratio was Asset Managers 50 percent; Banks 27 percent; Insurance 18 percent; and Retail 5 percent.

About maturity of the bonds he said that for 10-year bond it was March 30, 2016, and for 30-year bond it was March 31, 2036. The listing of these would be held in Luxembourg, he added.

About Coupon payment of 10-year bond he said it was 7.125 percent annually. This would be paid on bi-annual basis. Coupon payment of 30-year bond would be 7.875 percent annually, again to be paid on bi-annual basis, he added.

Dr Salman Shah said he was happy over the success of the bonds. He said that now Pakistan could go to international market as per its needs. He said that on good experience maturities of 15, 20, and 25 years would also be tapped in future strategies.

The Advisor said that with progress coming on economic horizon, benchmark spread of the country had been reduced.

He said that with the economic reforms undertaken by the government, confidence of international investors in the Pak economy had increased. He said that more than 150 international investors have posed confidence in the investment bond.

Talking about measures to improve further economic scenario, Dr Salman said: "We are embarking on a successful strategy to boost economical as well as political indicators." He added that with stability, the problem of financing for economic development would end. He said now people are willing to take long-term financial risk here.

Regarding strategy to reduce poverty he said that with growth at the current rate the level of poverty would be reduced to half in the next 15 years, or earlier.

Talking of foreign debt, he said it stood at $34 billion.


Copyright Business Recorder, 2006

Excellent News

SubhanAllah

Excellent news sir

bas dua karte raho ke Allah Pakistan ko bohat aur bohat hi ooncha maqaam ataa karai aur hum sab ko true Islam follow kerne ki himmat de aur hamare leaders ko espacially

Aameeen

excellent!

Ameen.

Hellraiser006,

Congratulations are in Order to Pakistan on attaining a Foreign Exchange Reserve of USD 14 Billion.

However in procuring the Additional Foreign Exchange Reserves by Issuing Bonds would not Pakistan’s Foreign Exchange Debt go up by a similar amount as the Increase of Foreign Exchange Reserves in Issuing the Bonds?

Peace

Yes it would...but this amount would be invested in different development ventures and stock exchange so it would not only return the debut amount but it would also be a source of profit in coming years

Aoa

Ameen.


Excellent news...

w/salaam

yes it will, but just like when a company takes a loan it increases its debt it makes no difference as long as the money is then used to increase revenue or profitability. Pakistan may increase its debt in the medium term but if that money grows then its more like a capital investment rather than a debt.

Also, sale of this kind of bond increases the credibility of Pakistan as a destination for foreign investment and that again brings in more investment. Therefore, a bond sale like this can give huge dividends if used properly.

MashaAllah!

Plus interest in 30 year bonds is a testament of people's belief in the country.

Silent revolution!

Our forex reserves are now the same as Belgium; I dont need to tell you people that though this is surely a good thing that the forex reserves have increased to previous levels, BUT we are very behind in our exports and our reserves even United Arab Emirates has twice our levels of forex!


http://www.cia.gov/cia/publications/factbo...r/2188rank.html

can u guys believe that usa ranks 10th well 4 spots behind india and 5 behind Russia

The US is at war at the moment that would explain the shortages of forex? Besides I heard that US spends $9bn a month for the war In Iraq; Thats almost twice as much as our defence budget for a year that they spend in just one month in Iraq.

i think than its not a good sign for american economy.
1. american land is not formally under threat.
2. america has huge budget and they shud be able to pay for it and not use its forex.
and just imagine america going to war wit a nation that is able to give usa big challange than wat u expect american forex to hit rok bottom, which i think is hard to believe for a nation economically as powerful as usa. so i think der are other factors to it maybe im wrong ur rite but this was just my thoughts

most of the countries in the world keep their foreign exchange reserves in US Dollars, and the Dollar is the worldwide currency of trade. I dont think the US NEEDS to have large reserves of its own currency. they can always buy back currency from the markets.

The $9Billion being spent in Iraq is increasing the US debt. the deficits are financed by the huge debt the government holds.

http://www.brecorder.com/index.php?id=4090...&term=&supDate=


MONEY WEEK: foreign exchange reserves to touch $13 billion mark next week


RECORDER REVIEW


KARACHI (April 10 2006): On March 31, SBP received foreign exchange worth $1.3 billion on account of sovereign bonds ($800 million), floated in later part of March, and a payment instalment by Etisalat Telecom of UAE ($500 million) on account of PTCL' sell-off.

These receipts pushed up Pakistan's liquid foreign exchange reserves from $11,307.5 million on March 25 to $12,484.3 million on April 1--a level which roughly ruled during June/July 2005. Reserves could have been higher still if the liquid foreign exchange reserves of the country had not faced loss of $123 million over the week, visibly to finance more imports.

On Friday, April 7, Etisalat deposited the second instalment of $660 million with the State Bank to complete $1.4 billion upfront payment. Hopefully, after the addition of $660 million during the week ending on April 8, liquid foreign exchange reserves must have risen to $13 billion mark.

Earlier on, Pakistan's liquid foreign exchange reserves had touched the $13 billion mark in April 2005.

In the meanwhile, latest monetary update (April 8) showed that private sector borrowing, which at Rs 330.5 billion on March 18 had crossed the full-year credit target only marginally, reached Rs 340 billion on March 25 after scoring a quantum jump over the week.

In the previous two weeks, credit to this sector had been increasing at a nominal rate of about Rs 3 billion per week and, apparently, gave the feel that the State Bank's tight credit policy had started working. It did not appear during the week under report.

If the economy is going to grow by about 6.3 percent then one needs to inquire from the private sector where this huge chunk of credit is going--to add to physical production; to services financing; or just to add fuel to speculation in shares, hoarding certain commodities, real estate or precious metals?

Meanwhile, budgetary borrowing by the government increased to Rs 161 billion on March 25 compared with Rs 154 billion on March 18. With borrowing under commodity operations and other heads still showing credit retirement of well over Rs 33 billion, net government borrowing stood lower at about Rs 128 billion though, compared with the previous week, it is higher by about Rs 6 billion.

It is hoped that, other things remaining constant, budgetary borrowing on April 1 would have stood reduced to Rs 81 billion, ie, well below the Credit Plan target of Rs 98 billion, as the government is stated to have retired the State Bank's debt worth about Rs 80 billion on March 31--the date the aforesaid $1.3 billion were sold to the State Bank. It would stand reduced by another Rs 40 billion on April 8 marking the end of the next week.

As in the previous week, other items (net) or OINs of the banking system continued exerting contraction impact (indicating higher liabilities than assets) on domestic credit and as such on money supply. The contraction impact on this account rose to Rs 92.6 billion during the week under report compared with Rs 91 million in the previous week.

These upward changes in government and private sector borrowings, adjusted for downward movements in OINs, led to an overall credit expansion of Rs 375 billion on March 25 compared with Rs 362 billion on March 18. However, overall monetary expansion during the year so far was lower at Rs 282 billion compared with Rs 267 billion on March 18 because of the contraction of money supply originating from the unusually large draw-down of foreign reserves amounting to Rs 93 billion as on March 25 compared with Rs 94 billion a week ago. Last year, during this period, overall credit expansion was lower, at Rs261 billion, mainly because of very low credit off-take by the government sector (viz Rs 11.5 billion only), though money supply was higher, at Rs 313 billion, mainly because of accumulation of reserves worth Rs 52 billion with the banking system.

It is important to explain the impact of the government sale of foreign exchange worth about $2 billion to the State Bank--$1.3 billion on March 31 and about $0.7 billion on April 7.

It would be interesting to see that when the actual effect of these transactions would appear on the balance sheet of the central bank for the weeks ended on April 1 and April 8, budgetary borrowing would have depressed by Rs 80 billion on April 1, and by another Rs 40 billion on April 8. This would scale down the overall government borrowing from the banking system by about Rs 120 billion by April 8 which, in turn, would lead to an overall credit contraction in the economy.

Would reduced overall credit creation lead to an equivalent reduction in money supply? The answer is 'no', because though the government borrowing would stand reduced by Rs 120 billion by April 8 debt retirement to SBP earlier used as a substitute for foreign financing of the fiscal deficit as envisaged in the budget, the equivalent increase in NFA or foreign would neutralise the contraction impact of domestic bank borrowing for budgetary purpose.

There would, therefore, be no effect of domestic credit contraction on current money supply but it could moderate future money creation because of the resultant lower NDA (net domestic assets) of the State Bank and, hence, reserve money.

(For comments and Suggestions: research. dept@aaj.tv)


Copyright Business Recorder, 2006

Guys,

US does not need to have forex reserves in federal reserves. The fact that almost every country keeps its forex reserves in US$s is a guarantee enough. So US can do with $0 in its forex reserves.

Fact: 33% of US$s reside outside USA.

almost none of the european countries holds huge reserves compareable to china, japan, india etc.

http://www.thenews.com.pk/updates.asp


Foreign reserves reach at $ 12.91bn


Updated at 2110 PST


KARACHI: The net foreign exchange reserves of country reached at $12.91 billion on April 22, 2006, said a weekly report of State Bank of Pakistan (SBP), which was issued here on Friday.

The reserves had reached at $ 12.9065 billion on April 15, 2006. Foreign reserves held by the SBP stood at $ 10.5492 billion and the reserves held by the banks other than SBP reached at $2.3610 billion.

European countries dont have to hold huge reserves because their own currencies are strong and stable. plus, i'm pretty sure they dont have huge double deficits (like we do).

i've noticed that the forex hasn't increased that much since 2003-4....when it hit around 12 billion....

A jump from 600mn to 12bn USD is a lot, I guess we should just keep a steady and moderate growth from here on; besides, growth of 2bn USD is a lot!

But from these reserve what the benefit drived by the people of Pakistan

There's no point increasing the forex reserves from the current levels. I suspect, the SBP has invested some of its forex reserves somewhere.

A country's forex reserves should be about the same size of its annual imports. Rule of thumb!

There are many avenues the government has to invest on rather than having its reserves in SBP.

Exactly. The US never had more than a few billion dollars in forex reserves until the last few years. Other countries buy US treasuries, therefore there is no reason for the US to have forex reserves (which only prop up foreign currencies).

the impostant question, as already mentioned, is what benefit is a common man getting from all this progress?

gdp increase does not always translates into relief for common man. And that is the dangerous part of it. When richer get more rich and there is news of lots of development and still common person does not see the fruits, he becomes frustrated and at times also rebels against the system.

So either gov quickly transfer the fruits to lowest levels or you will see gov go sooner or later, not because people like bibi or ganja, but rather they feel deprived of goodies by mush.

That is very true and is the crux of challenge facing most developing nations including China.

http://www.nation.com.pk/daily/may-2006/6/bnews1.php


Govt to raise reserves beyond $14b in June

BY JAVED MAHMOOD

LAHORE - The Federal Government is in a bid to raise foreign exchange reserves of the country beyond 14 billion dollars by June 2006, The Nation learnt on Friday.

“We are making efforts to raise more than one billion dollars through the off-loading of the Global Depository Receipts of the OGDCL in international stock market next month,” a senior finance ministry official said.

At present the foreign exchange reserves of the country have improved to 13 billion dollars, which could further increase to above 14 billion dollars when the central bank would receive foreign exchange from the sale of OGDCL shares in the international market, he added.

In next few weeks the federal government would manage the listing of OGDCL at London Stock Exchange (LSE) and off-loading of 10-15 per cent shares of the company, he said.

“We have appointed Citigroup, Goldman Sachs and BMA Capital Management as financial advisory consortium on Thursday for the sale of 10 to 15 per cent shares (430 million to 645.139 million shares) of Oil & Gas Development Company, the country’s largest oil & gas exploration and production company,” said the official, adding the Citigroup and Goldman Sachs will act as joint global coordinators and joint book-runners while BMA Capital Management would work as domestic joint lead manager.

Official said the financial advisory consortium, in collaboration with the Privatisation Commission and OGDCL, would also conduct international road-shows to attract investors for the transaction.

At present the share of OGDCL is being traded around Rs 160 at Karachi Stock Exchange, equal to 2.66 dollars per share. The government and stock market analysts are of the opinion that the OGDCL GDR could attract more price than its current value at KSE. The Nation learnt that if the ODGCL share attracted a minimum of 2.5 dollars price, the government would be able to mop up more than 1.60 billion dollars from the sale of 15 per cent shares (645.139 million shares).

It may be noted here that the foreign exchange reserves of Pakistan, after reaching near 13 billion dollars in March 2005, have declined to 11.40 billion dollars last month because of unprecedented growth in imports that widened the trade and current account deficit much beyond the official projection.

The reserves, however, have improved to 13 billion dollars after the State Bank of Pakistan has received 1.34 billion dollars from Etisalat for the sale of PTCL and 800 million dollars from the sale of Global Bonds, sold in the international markets.

Officials said that the federal government would continue the process of offering shares of mega public sector companies in the international stock market and also float international bonds with the aim to strengthen the foreign exchange reserves and to reduce dependence conditional on foreign loans.

One of the easiest ways to pass on the fruits of economic growth to the common man is to build huge infrastructures.

US did back in the 1940s, China is doing, Pakistan should start it as well. Start of construction work of Bhasha dam is a welcome step, and would help a few thousand families earn their livelihood. Job generation, at the end of the day, is crucial.

Nice news. Hope the addtion in reserves be more trade oriented rather than receipts from privatization.
Still its nice

http://www.brecorder.com/index.php?id=4241...&term=&supDate=

Pakistan's foreign exchange reserves up by $38.3 million


KARACHI (May 12 2006): Pakistan's liquid foreign exchange reserves registered an increase of $38.3 million at $13,054.3 million on May 6, State Bank of Pakistan announced here on Thursday. Of $13,054.3 million liquid foreign reserves, the central bank held $10,655 million whereas other banks held $2399.3 million.


Copyright Associated Press of Pakistan, 2006