By Kaleem Omar

The government has hired Mercer Investment Consulting to advise on the management of the country's growing foreign exchange reserves, Finance Minister Shaukat Aziz said on Friday. Aziz told Dow Jones Newswires that Mercer will prepare an investment strategy to maximise returns on Pakistan's forex reserves, which currently stand at an all-time high of $ 10.5 billion.

"We need their (Mercer's) expertise because we never had these levels of reserves before," Aziz said.

Fuelled by home remittances, increased aid inflows and dollar-purchases by the State Bank of Pakistan from the interbank market, Pakistan's reserves have been rising ever since it sided with the United States in its "war against terrorism," which prompted more Western aid, the rescheduling of Pakistan's external debt, lower interest rates on foreign debt and loan write-offs.

These factors have combined to reduce Pakistan's debt servicing costs from 60 per cent of budget revenues to 40 per cent, giving the country much needed fiscal space to increase development spending. A rise in exports earnings has contributed to improving the balance of payments position.

Western governments' tighter regulations to curb money laundering also resulted in higher flows of overseas workers' remittances through banking channels, which has boosted the official reserves. Previously, a high percentage of remittances used to come through havala channels.

A recent government statement said that the State Bank was also working on a blueprint to upgrade its skills, human resources and management to better prepare it for reserve management.

As Dow Jones Newswires pointed out, Pakistan keeps the majority of its reserves in dollars and plans to outsource its investment to international investment banks with the aim of increasing the returns on investment.

Meanwhile, in another development, State Bank Governor Dr Ishrat Husain on Friday inaugurated SBP's Credit Information Bureau's (CIB's) online facilities for banks, development finance institutions (DFIs) and non-banking finance companies (NBFCs). Briefing reporters on the move on Friday, State Bank Deputy Governor Tawfiq A. Hussain said, "With the launching of this facility, the State Bank of Pakistan becomes the first central bank in South Asia to offer online credit information services to its stakeholders."

He said, "The CIB's online service, which was developed in collaboration with the Pakistan Banks Association (PBA), is an important step towards the provision of best international practices to financial institutions and State Bank's transformation into a modern and dynamic central bank."

He explained that through this online facility, financial institutions could now obtain credit reports from the State Bank electronically via dial-up. Besides credit reports, financial institutions will also submit monthly credit data required by the SBP online, he said.

"Under this facility, authorized persons of the financial institutions listed with the State Bank will be allowed online access to the CIB servers," the SBP deputy governor said.

According to him, this facility will promote efficiency in the credit appraisal process of banks, DFIs and NBFCs. It will also minimize the time lag in submission of data to the CIB and retrieval of credit reports, he said.

He said the State Bank had also taken the lead in setting up a Credit Information Bureau back in January 1992.

The CIB collects credit data in respect of borrowers of Rs 0.5 million or more from all banks, DFIs and NBFCs. Under State Bank regulations, it is mandatory for these institutions to see credit reports from the CIB before approving any financial facility of Rs 0.5 million or more to borrowers, the SBP deputy governor said.

HOME