The NFA of the banking system witnessed a net contraction of Rs 139.9 billion during H1FY12, in sharp contrast to an expansion of Rs 126.8 billion during the same period last year. According to SBP's second quarterly report this was driven by the developments in external accounts.
Specifically, the overall external account recorded a deficit of $1.8 billion during H1FY12 compared to surplus of $1.0 billion in H1FY11.1 The report said that within the banking sector, the major contribution towards the net contraction in NFA came from SBP, which accounted for 87.6 percent of the total contraction, while its share in NFA was 78.7 percent as of end-FY11. This reflects a reduction in SBP's foreign exchange reserves stemming from the widening current account deficit and dwindling capital and financial account surpluses, it added.
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