$3.5b inflow to stabilise rupee value: Shamshad

KARACHI - Governor State Bank of Pakistan Dr Shamshad Akhtar has said that the foreign exchange inflows to the tune of $3.0 billion to $3.5 billion are expected to come in the banking system in the short to medium-term. These flows coupled with joint efforts of SBP - Commercial Banks will further stabilise the Pakistani Rupee parity vis-a-vis US dollar and calm down foreign exchange markets.
SBP Governor disclosed this on Friday in her meeting with the heads of commercial banks at the State Bank of Pakistan in Karachi. Dr Akhtar assured the participants that there will be 'no reversal' of foreign exchange liberalization measures seen in the past years. However, she expressed her concerns over excessive volatility and weakened Exchange Rate and commented that the recent behaviour of the exchange market "is totally out of line." "We aren't in a crisis like situation and several measures are in place to remove macro-economic imbalances," she said and added that the Government has expressed its firm resolve to bring down fiscal-deficit, retire central bank borrowings and cut non-developmental expenditures. "There is a strong recognition that macro-economic imbalances have to be resurrected and this is the corner stone of Government's economic policy," she added.
Dr Akhtar informed the meeting that the Government has taken steps to mobilize foreign funds and added that some of the inflows which are expected to realize soon include $2.1 billion from Multilateral Banks, $500 million from friendly countries, $200million for earthquake relief, $100million from DFID, $700million from MCB Bank's stake sale, $100 million from Barclays Bank and the rest through private sector GDRs and other regular sources.
She said that the Government is also taking measures to control inflation and added that the central bank will continue to remain in a monetary tightening phase. Given these facts, SBP Governor said: "Current rupee volatility is not reflective of the macro-economic fundamentals." She said that she is perplexed over recent Inter-Bank market behaviour and urged banks to play a proactive role to kill negative sentiments in the market. She said that the central bank has made timely and effective interventions in the market and added that any future interventions by the central bank will be in accordance with its analysis of the situation. The Central Bank is vigilant of the situation and will take the necessary steps as the situation warrants.
"Had we not intervened effectively, the exchange rate would have been at a different level, but present level doesn't reflect fundamentals" she added.
SBP Governor urged the bankers to educate their clients, including importers and exporters, about true macro-economic fundamentals and play their role to bring stability in the Inter-Bank market, which is not only in the interest of the country but banks as well. She said that banks have a duty to encourage exporters not to hold back export receipts and mobilize foreign exchange funds in the interest of the country. "Let's think of the country...strong