Pakistan: Withdrawals from FCY deposits on the rise : LUSENET : Grassroots Information Coordination Center (GICC) : One Thread

Withdrawals from FCY deposits on the rise

By Mohiuddin Aazim

KARACHI, Sept 21: People have started withdrawing dollars from foreign currency accounts on growing fears about the US attack on Afghanistan in retaliation for the Sept 11 terrorist strikes on New York and Washington.

Executives of foreign banks privately admit that their clients are making withdrawals from foreign currency accounts more rapidly than in the past but they refuse to go on record. "I can confirm to you that unusually big withdrawals are taking place at our branches in Peshawar and in Islamabad," said a senior executive of a leading European bank.

Sources close to the State Bank also confirmed that banks were reporting to the SBP larger-than-normal outflows from the foreign currency deposits. "The figures are pouring in and it may take some time before we know how much withdrawals have so far taken place," said one of the sources. He said larger withdrawals from foreign currency deposits is one of the reasons for the fall of the rupee in the inter-bank market.

Up to Sept 8, banks fresh foreign currency deposits were worth $1.637 billion that came down to $1.626 billion on Sept 15, showing a decline of $11 million. But bankers said it would be premature to attribute this fall solely to the post-Sept 11 situation, adding that the figures coming in over the next few weeks would confirm if there was a real impact of the panic-withdrawals on the volume of foreign currency deposits.

The rupee on Friday finished at 64.35/64.40 to a US dollar in the inter-bank market after touching an intra-day low of 64.48. On Thursday, it had closed at 64.30/64.35 to a dollar but a couple of deals were struck at even lower rates in the afternoon as one European bank was out to purchase a few million dollars for one of its clients.

KERB MARKET: The kerb market remained closed on Friday due to strike observed on the appeal of religious leaders against the US threat of launching an attack on Afghanistan. Thus the fall of the rupee in the inter-bank market had no reflection on the open market exchange rates. But currency dealers said the rates in kerb would mirror this fall when private money changers would reopen on Saturday.

-- Martin Thompson (, September 22, 2001

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