The government of Pakistan agreed to borrow USD 625 million from domestic and international banks to boost foreign exchange reserves and stop continuous bashing of the rupee.
The Pakistani reserves currently stand at USD 10.3 million and the government had sought offers from the banks about two months ago. Most of the banks offered an interest rate of 7.77 per cent over LIBOR (London Inter-bank Offered Rate), which was reduced to 5.3pc for one year through negotiations.
The spokesman and advisor of finance ministry, Rana Assad Amin said, "We have approved the agreement under which the banks are required to bring USD 625 million from abroad in 10 days." The bank that agreed to provide foreign exchange reserves include Bank of Tokyo, Alfalah Bank Limited, Credit Suisse, Standard Chartered Bank, National Bank of Pakistan, United Bank Limited and Allied Bank Limited with the highest contribution of USD 150 million from Bank of Tokyo.
The spokesman further said that the agreement was aimed at boosting foreign exchange reserves and stopping the declining trend of the local currency.
Amin said that the government was under pressure from the International Monetary Fund and in fact it was one of the prior actions for a USD 6.64 billion extended fund facility to mop up USD 125 million from the market between July 1 and August 31 that shattered the market.
The advisor of the Finance Ministry criticized that the problem with the IMF programme was that it targeted the exchange rate instead of controlling interest rate. The inter-bank rate of the rupee was 105.85 against the US dollar on Monday.