Islamabad: Overseas Pakistanis to be offered attractive rates on government papers

The government has decided to lure public sector institutions and overseas Pakistanis to invest in short- and long-term government papers through attractive rates of return to partially overcome its severe financial crunch.

A senior official said on Friday that the Government Commercial Papers would be launched next week to enable public sector institutions to invest their unutilised funds and earn profits through short-term investments — three months to one year maturity period.

The institutions have around Rs250-300 billion in funds which remained unutilised because of legal complexities and other practical reasons.

“The target is to attract all these unutilised funds, but even half the amount will be of great help for the government, which is looking at all financial sources from home and abroad,” the official said.

He said there were a number of schemes already available to individual investors through long-term certificates and now the government was trying to involve institutions in similar schemes through short-term papers.

“The institutions will also have the option to withdraw their investments before maturity but, like individuals, they will have to sacrifice part of their profits in case of early encashment,” he added. He refused to divulge details of the rate of return on the papers, but said these would be competitive and market-based.

The government also plans to issue foreign currency bonds for overseas Pakistanis within a month on the pattern of saving schemes at home. The bonds would be initially sold through commercial banks in the Middle East and then in western countries.

The two initiatives are aimed at reducing dependence on comparatively expensive borrowing from the State Bank (a record Rs625 billion last year), checking inflationary tendencies and containing the rising fiscal deficit — Rs777 billion or 7.4 per cent of GDP last year.

The official said that remittances from overseas Pakistanis, which were $6.5 billion in 2007-08, were a major source of foreign currency inflows.

He said the central bank had allowed the Directorate of National Savings to offer its saving schemes to overseas Pakistanis, particularly those living in Saudi Arabia and other parts of the Middle East, through commercial banks. The Habib Bank and United Bank have respectable presence in Saudi Arabia. Pakistanis in the UAE, Qatar and Oman have invested in some government securities and soon new products would be launched for them.

Source: Daily dawn, 4th October, 2008

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