Net outstanding balances represented by ''Special US Dollar Bonds (a Government of Pakistan security) stood reduced to $403.3 million as on September 30, 2005, according to the statistics placed by the State Bank on its website.
On the commencement of FY06 on July 1, 2005, these balances had amounted to $420.6 million against actual gross sales of $2,274.6 million effected between July 21, 1998 and June 30, 2005. Most of the gross sales amounting to some $1,422 million took place in the first year (July 21, 1998 to June 1999) of the Scheme. There have been no fresh sales since June 2005.
Under the Scheme, holders were free to convert their outstanding balances of $11 billion in the old FC accounts into these Bonds. It means that the left over $9.753 billion worth of old FCDs were to be converted only in rupees--there being no other option.
It is worth mentioning that at the time of nuclear explosions by Pakistan, in May 1998, it was decided that no new foreign currency account (FCA) would henceforth be opened in the name of resident Pakistanis and that withdrawals in foreign currency from old FC accounts--whether maintained by residents or non-residents--would remain suspended till further orders though they could withdraw any amounts in rupees (cf FE Circular No 12 of May 29, 1998).
Later on, in terms of FE Circular No 42 of July 21, 1998, all holders of FCAs were permitted to purchase US Dollar Bonds (of 5-, 7- and 10-year tenures) in denominations of $100, $1,000, $10,000 and $100,000 against the outstanding balances in their accounts. The profit ranged from 6 months'' LIBOR to 6 months'' LIBOR plus 2 percent, depending upon the tenure. The amounts of profit, payable at half-yearly intervals, were to be paid in Pakistan rupees to the residents and in US Dollars to the non-residents. Profit was exempt from levy of income tax and deduction of Zakat as long as the Bonds were held by the investors. The face value of the Bonds was payable in US Dollars only on maturity. Premature encashments would have to be in rupees.
It may be of interest to note that holders requested premature payments of Bonds worth $189.8 million in the first year. Total encashment during the first four years, which under regulations could not be made in foreign exchange, amounted to $653.7 million. As the maturity for the 5-year bonds approached, holders encashed as much as $584 million in FY02 alone. In the following two years, another $510 million of Bonds were encashed as the 7-year Bonds also approached their maturity date. By June 2005, marking the end of FY05 and the Seventh year of the issuance of Bonds, nearly 82 percent of all bonds issued till then had been encashed by the holders.
It appears that the balance left out now pertains only to 10-year bonds which were probably the least preferred by the holders. Though encashement is continuing, the pace of encashment has slowed down considerably since July 2005, indicating investors'' desire to have the left over Bonds encashed in dollars at the date of maturity which may fall any day between July 21, 2008 (if purchased on the date of commencement of the Scheme) and June 30, 2015 (if purchased on the last day of the Scheme).