![]() In the case of NPCs, these are encashable at any time i.e., GoP will have to repay them on demand.ĭoes SBP not remember the 13.25% discount rate fiasco where most likely GoP ended up paying 13.25% or much more in dollar terms despite the 13.25% being a return in rupees? When free flows are encouraged in capital account, and that too by Governor of the central bank, that is what ends up happening. ![]() If an investor sells the instrument in the secondary market, the payment to the investor is being made by the buyer of the instrument and not GoP. When GoP issues T-bills, PIBs, or Eurobonds, it raises funds for a fixed tenor. GoP/SBP should clearly show these investments as short-term debt in the books. There is no way that SAMBA UAE will be converting its loan of $1,000,000 into Rupees. In the SAMBA term sheet, 91% of the investment ($1,000,000 out of $1,100,000) is debt and will have to be repaid. The assumption of SBP, GoP, and the financial press may be that this investment is permanent financing as they may be hoping that eventually, overseas Pakistan will convert this into rupees at a slightly higher interbank rate. I had written at the time that these flows are hot money and aren’t exactly low risk. ![]() SAMBA is getting almost 70% of the return that GoP is paying. The rest of the amount (less WHT) is going to the SAMBA. The last column indicates that when GoP pays out interest expense of $715,000, only $150,000 goes to overseas Pakistanis.
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