Sources said the chief executives of various banks during a meeting on Tuesday plainly conveyed to the Finance Minister that exchange rate can only be determined by market dynamics on a permanent basis and if the government wants to stabilise rupee, it can only be achieved by improving foreign exchange reserves with adequate inflows and by making liquidity situation better in the market. The banks'' viewpoint was that neither government nor commercial banks can fix exchange rate. The Finance Minister has reportedly asked commercial banks to "play fairly" and discourage speculators.
A senior official said banks were told that the situation on external account would remain relatively bad till the end of current month and things would start improving from the next month with materialisation of foreign inflows on various accounts. The Finance Minister is said to have sent a clear message to the speculators that the government is aware of them.
The meeting continued for about two hours and the chief executives of banks were told that for the first time open market rates were less than the interbanks'', said Advisor Finance Ministry Rana Asad Amin.
Talking to Business Recorder, he said that foreign exchange reserves would start improving with the receipt of US $137 million from Islamic Development Bank on Wednesday, US $300 million of Coalition Support Fund (CSF) would either be reimbursed by US in end of current month or beginning of next month. Amin added that 3G auction would be completed by the February 2014 and $500 million each from World Bank (WB) and Asian Development Bank (ADB) would materialise by March 2014. A US $500 million bonds transaction would also be completed by March 2014.
In reply to a question, Amin said that "we are living in regulatory regime" and it is not the job of Finance Ministry to track down speculators. The State Bank of Pakistan (SBP) has put in place a system and may have information about speculators.
A statement issued after the meeting stated that Federal Minister met the heads of Commercial Banks here on Tuesday and exchanged views with them on the current economic, monetary and fiscal situation of Pakistan.
In his opening remarks, the Finance Minister said the government has constituted a steering committee which will submit its recommendations for promotion of Islamic banking in the country by 31st December. This will provide a policy framework for Islamic banking in the country. The constitution of the Steering committee and its terms of reference have already been notified and released to the media, he added.
Dar stated that we have to work together to keep the forex market stable and acknowledged the help and co-operation extended by commercial banks in discouraging speculators which is evident from the fact that the interbank rate today closed at Rs 107.78 to a dollar.
The Finance Minister said the government has redoubled its efforts to increase its foreign exchange reserves. In this connection, he said the government expects a privatisation payment of $800 million, $800 million against outstanding payments due on account of Coalition Support Fund, over $1.2 billion against auction of spectrum licence besides $137 million expected from Islamic Development Bank today.
The Governor SBP Yaseen Anwar informed the meeting that in the last 2 days exporters have liquidated export proceeds totalling $70 million, the government is receiving $30 million per day on account of remittances which has improved the foreign exchange position.
The Finance Minister said he is confident that the situation of inflows will further improve and those who speculate on Pakistani currency would end up as losers. The Finance Minister said that we have a clear roadmap to build foreign exchange reserves up to $20 billion in the next 3 years.
The government encouraged by positive outlook projected by "Standard and Poor" and ''Moody''s''. There are plans to float a Global Rupee bond with the assistance of IFC who are also interested in floating of sovereign bonds of Pakistan which has received a very positive response from the market.
The Finance Minister thanked the Executives of Commercial Banks for co-operating with the government.
On this occasion Atif Bajwa, President Alfalah Bank, Imran Maqbool, President Muslim Commercial Bank (MCB), Tariq Mehmood, President Allied Bank Limited (ABL), pledged their support and co-operation to the government in its efforts to stabilise the economy and markets. They also welcomed the Finance Minister''s frank and candid assessment of the economy and said that they share his optimistic outlook of Pakistan''s economy and its sound fundamentals which would send a very positive message across markets.
Those who participated in the meeting among others include the Governor State Bank of Pakistan (SBP) Yaseen Anwar, Senior officials of the Ministry of Finance and Chairman Steering Committee on Islamic Banking Saeed Ahmad Wajahat Baqai, Executive Vice President, Group Head Credit, National Bank of Pakistan, Karachi. Syed Mohammad Talib Rizvi Senior Executive Vice President and Group Head Habib Metropolitan Bank Limited, Imran Maqbool, President, Muslim Commercial bank Limited (MCB), Karachi.
Tariq Mehmood, President, Allied Bank Limited, Muhammad Shahbaz Jameel, Executive Vice Resident and Regional Chief Head, United Bank Limited, Karachi, Nadeem Lodhi, CEO ,Citi Bank, Managing Director,. Aamir Irshad, Country Retail Head, Ms. Seema Kamil, Regional Corporate Head and Uzeir Naveed, Habib Bank Limited., Atif Bajwa, Chief Executive Officer of Bank-Alflah, Karachi. Zaheer Mehdi, Managing Director, Standard Chartered Bank Limited.