State Bank of Pakistan (SBP) Governor Dr Ishrat Husain has said that the new mobile phone companies have been allowed debt equity ratio of 80:20 for making investment in Pakistan as compared to earlier ratio of 60:40.
He was addressing the World Bank seminar at the launching of Global Development Finance 2004 report.
He also said interest rate in Pakistan depends on market situation and there is no prediction of their upward movement in near future.
The recent small upward push was due to increase in inflation and increase in the demand for money. The SBP governor said 15-20 years Pakistan Investment Bonds were issued to set benchmark for long-term returns for two main companies State Life Insurance and Employees Old Age Benefit Association (EOBI).
Ishrat said that a relief has been offered in the foreign currency dealings due to the success of the monetary policy. When local textile manufacturers needed foreign currency for their imports they did not have to suffer high rates of imports and export banks of the exporting countries. Their requirements were met by the inter-bank foreign exchange dealing.
He also said that the recent growing demand for money has put pressure on the interest rates. If the demand decreases in future then there would be no pressure on the interest rates, which would remain stable. Moreover, increase in inflation is another source of pressure on the interest rates. It especially includes non-food non-oil imports, which is normally the machinery.
The interest rates were atrocious almost near 20 percent a few years back, which have come to 5-7 percent cutting the costs of the business substantially.
Wapda had issued bonds for meeting their financial requirements from the local markets. Others are also using local money markets to meet their long-term financial requirements. Container terminals are also being constructed with the financing of the local market. Similarly, housing sector needs long-term financing.
The State Bank wants to set benchmark for such investments and for that long-term bonds were issued.
World Bank Country Director John Wall said that the poverty line set in Pakistan is arbitrary line and its methodology could vary when any other organisation would measure poverty from some other point of views. However, he said that the World Bank very much expects fall in poverty after the recent upsurge in economy.
World Bank Economist Mansoor Dailami said that the developing countries must maintain improvement in fundamentals and avoid excessive debt accumulation. Moreover, liberalisation in services and economic growth will drive the foreign direct investment (FDI).
Sustainability of private capital flow recovery depends on careful management of developed countries macro-imbalance. More efforts are needed to expand aid flows.
He said that the net capital flows to the developing countries as a whole rebounded to $ 200 million in 2003, up from $ 155 billion in 2002, but unfortunately, only a few relatively better off countries are sharing most of the gains.
Meanwhile, Official Development Assistance (ODA) on which poorest countries depends for external capital has increased only marginally to $ 58 billion. The report "Harnessing cyclical gains for development" was launched at the World Bank local office.
According to the report, the increase in net private flows - bonds and bank loans - most of which went to Brazil, China, Indonesia, Mexico and Russia, is the major factor in an overall increase in net capital flows of the developing countries from all sources, public and private, to $ 228 billion in 2003 from $ 190 billion in 2002.