Morning Briefing for Feb 10, 2012 – Standard Capital

Karachi: OGDCL bonds launch may delay on FAC’s advice

The government may wait till the normalcy in the international capital markets for the launch of Oil and Gas Development Company Ltd (OGDCL) exchangeable bonds with a transaction size of $500 mn with no upsize option, if advised by the Financial Advisory Consortium (FAC) based upon the market conditions during the current fiscal year.

According to Standard Capital, Officials at Privatization Commission and Ministry of Finance informed that the government had earlier planned to launch exchangeable bonds during last fiscal year but was dropped due to the extremely volatile global financial climate stemming from the European Debt Crisis and concerns over USA fiscal policy.

Pakistan’s forex reserves fall to $16.69bn
Pakistan’s foreign exchange reserves fell to $16.69 billion in the week ending Feb 3, compared with $16.87 billion the previous week, the central bank said on Thursday. Reserves held by the State Bank of Pakistan (SBP) fell to $12.32 billion from $12.52 billion a week earlier, while those held by commercial banks rose to $4.36 billion, compared with $4.35 billion the previous week. Foreign exchange reserves hit a record $18.31 billion in July, but have since eased due to debt repayments. Islamabad has to start repaying an $8 billion International Monetary Fund loan in early 2012. Without additional sources of revenue, that will put further pressure on Pakistan’s foreign exchange reserves. Reserves were boosted in June last year by inflows of $411 mn, including a $191.9 mn loan from the World Bank, and a $196.8 mn loan from the Asian Development Bank. Higher export proceeds and a record inflow of remittances have also helped support Pakistan’s foreign exchange reserves. According to official data, remittances rose 19.6% to $6.33 billion in the first half of the fiscal year (July‐June), compared with $5.29 billion in the same period a year earlier.

Discount rate seen flat
Central bank is seen keeping its key policy rate at 12 % on Saturday as inflation is expected to rise in the remainder of the fiscal year through June because of higher oil and gas prices. Eleven of 15 analysts polled by Reuters expect the State Bank of Pakistan (SBP) to keep the key rate steady, three anticipate it will cut it by 50 basis points and one expects it to cut it by 100 basis points. Since the start of the fiscal year last July, the central bank has cut interest rates by 200 basis points. But it kept its policy rate unchanged in the last monetary policy announcement in November.”The State Bank of Pakistan faces a difficult balancing act at the February 11 monetary policy meeting,

Dealers exploit urea price disparity Imported urea being sold at Rs1,300/bag
Government is selling imported urea at Rs1300/ bag by reducing the price by Rs490 per bag, sources disclosed to The Financial Daily. On the other hand, local manufacturers are selling urea at Rs1800 per bag which is 38 % higher. Due to gas shortfall and cess imposition, local manufacturer has increased the urea prices, but with non availability of gas, it can be asked that how government would retain lowered prices. But it is clear that dealer is making money by not giving lower prices to farmer. An industry expert said that, as this is an election year and government may dictate the prices with subsidy. However, government has already granted subsidy worth of Rs25 billion in seven months of current fiscal year (7MFY12) versus target of Rs12 billion. On the other hand, Trading Corporation of Pakistan (TCP) likely has 1 mn tone urea which is sufficient to meet the demand till March off‐take to maintain it at current prices. According to industry experts, possible increase in gas supplies to SNGPL’s fertilizer plants in March 2012 would translate into reduction in manufacturer prices.