Private sector to pay 50pc of oil import bill

KARACHI: The State Bank of Pakistan on Wednesday shifted diesel import bill payment to private sector as part of the agreement with the International Monetary Fund (IMF).

‘It has now been decided that with effect from August 1, 2009, all purchases of foreign exchange related to import of diesel and other refined products shall be made by the banks from the inter-bank market,’ said an SBP circular.

The central bank has already gotten rid of the furnace oil import bill payment.

The private sector will now pay about 50 per cent of the entire oil import bill.

However, the SBP would continue paying import bill of crude oil that alone accounts for 50 per cent of the total cost of oil import.

Pakistan had signed an agreement with the IMF in November 2008 that bounded the State Bank to pursue a flexible exchange rate policy.

Under the IMF conditions, intervention in the foreign exchange market by the SBP (including the provision of foreign exchange for oil imports) will be aimed at meeting the given reserves target.

The IMF programme set February 1, 2010 as the last date for the SBP to shift the entire oil import bill payment to the private sector.

However, the exchange market has started feeling the heat of this shifting of oil import bill payment towards the private sector.

The currency dealers in the inter-bank market said dollar appreciated significantly against the rupee during the last 15 days as the private sector heavily bought dollars after enhanced involvement in the import of oil products.

The rupee fell to Rs82.50 against the greenback on Wednesday in the inter-bank market. The reflection of the dollar demand also seen in the open market as the dollar traded at price higher than Rs83.

Exchange companies said dollar was traded at Rs83.10 but it closed at Rs82.80 on Wednesday.

However, a senior currency dealer said the recent dollar hike was temporary and rates would come down by end of this month.

‘Large payments are made in the month of June to clear the accounts at the end of fiscal year,’ said Atif Ahmed, the currency dealer.

However, he was not sure that dollar would fall below Rs82 by end of this month.

Analysts said a weak economy weakens its local currency resulting in massive loss in the exchange rate market. Rupee lost 23 per cent against US dollar in calendar 2008.

The frequent depreciation of the rupee also provides chance for speculators to make money by creating more uncertainty in the exchange market. link....