WHO GIVES FINANCIAL SERVICES???

DFI means Development Financial Institution and

includes the Saudi Pak Industrial and Agricultural
Investment Company Limited, the Pak Kuwait
Investment Company Limited, the Pak Libya
Holding Company Limited, the Pak Oman
Investment Company (Pvt.) Limited, House
Building Finance Corporation and any other
financial Institution notified under Section 3-A of
the Banking Companies Ordinance- 1962.

BANK means a banking company as defined in the

Banking Companies
Ordinance, 1962.

They are dealing in money related services:

WHAT MONEY IS & WHAT IT DOES?

It is used in clearing goods & services.

Functions:
 a)MEDIUM OF EXCHANGE: We can get things
in exchange of money.

b)STANDARD OF VALUE: It can be used to

compare the values of things & currencies.

c)STORE OF VALUE: One can save money for

various purposes.

d)MEASURE OF DEBT: Short term or long term

debt.

Near Money & liquidity: Near money is a share or

COI and liquidity means convertibility of assets into
cash without loss as quickly as possible.

TYPES OF BANKS:
a)Commercial Banks
b)Exchange banks i.e. foreign banks
c)Saving Banks like post offices
d)Mortgage banks like HBFC
e)Central Bank
STATE BANK OF PAKISTAN
It was formed in 1948 under SBP Act which was
amended in 1956.
FUNCTIONS:
a)Banker to the issue.
b)Banker to the Government
c)Advisor to the Government
d)Bankers’ Bank: 5% of demand liabilities & 2%
of time liabilities.
e)Controller of credit
f) Exchange control

OBJECTIVES OF EXCHANGE CONTROL

Exchange control is management of available
resources in foreign currency. It refers to
following points:
a)OVERVALUATION: More than the value
determined by market forces.
b)UNDER VALUATION: More than the value
 determined by market forces.
c) STABILITY OF EXCHANGE RATES:
Conversion at official rate of exchange to
stabilize value.
d)PREVENTION OF CAPITAL FLIGHT: Gold
and foreign currency cannot be exported without
permission.
e)PROTECTION TO DOMESTIC INDUSTRY:
To encourage business environment in the
country.
f) CHECKING NON-ESSENTIAL IMPORTS:
To control the import of luxury items.
g)HELP TO PLANNING PROCESS: How to
spend foreign currency on result oriented items.
h)BOP PROBLEMS: With prudent policies BOP
problem can be controlled.
i) EARNING REVENUE: Foreign exchange is
sold to Businessmen, traders etc. at a certain
rate.
j) REPAYING FOREIGN DEBT: By earning and
conserving foreign exchange.
 k)RETALIATION: Monopoly power and better
bargaining terms.

The banks have the following services related to

general banking, credit & foreign exchange:

Accounts i.e. current & saving

ATM
Bill payments
Cheques
Debit card
Direct deposit:
Forex
Fund transfer: From the account of same customer to
another account.
Payorder/DD
OD
Internet banking
Personalized banking
Safe deposit
Phone Banking
Traveler’s cheques
Stop payment

PAK RS.VS USD SINCE APRIL 2008

The rupee has shed 37% i.e. from Rs.62.57 in April
2008 to Rs.87 in 2011 in the present Government
period due to following reasons:

• Losing investors’ confidence on the current

Political system.

• Global recession.

• Flight of capital due to judicial crisis.

• Law and order situation after Benazir’s

Assassination.

• IMF condition to make oil/POL payments

through open market in stead of SBP.

• High oil & food import prices.

• $11.7B loan of IMF.

• Freezing of forex exchange companies.

$ =Rs.19.32 in 1989.

INTERNATIONAL MONETARY FUND (IMF)

It was established in 1945 & is offering following
services to its member countries:

a) To promote exchange stability.

b) To promote international monetary
cooperation & expansion of international
trade.
c) To control BOP problems.

The historical detail of funding provided to Pakistan

is as follows:

IMF Support Arrangements to Pakistan

(1980-2004)
Date of Amount Disbursement Signed
Arrangement Arrangement (SDR (SDR during
(expiration) million) million) rule of
EFF 24-11-80 1268.00 1079.00 Ziaul Haq
 (23-11-83)
SBA 28-12-88 273.15 194.48 Benazir
(7-3-90) Bhutto
SAF 28-12-88 382.41 382.41 Benazir
(27-12-91) Bhutto
SBA 16-9-93 265.40 88.00 Nawaz
EFF/ (15-9-94) 379.10 123.20 Sharif
ESAF 22-2-94 606.60 172.20
(21-2-97)
22-2-94
(21-2-97)
SBA 13-12-95 562.59 294.69 Benazir
(31-3-97) Bhutto
EFF/ESAF 20-10-97 454.92 113.75 Nawaz
(19-10- 682.38 265.37 Sharif
2000)
SBA 29-11-2000 465.00 465.00 Pervez
(30-9-2001) Musharraf
PRGF 7-12-2001 1033.70 861.42 Pervez
(5-12-2004) Musharraf

LATEST LOAN:
Stand-By Arrangement (SBA) 2008-10

Main Features

a) Pakistan submitted to the IMF a Request for

Stand-By Arrangement on 20 November, 2008
amounting SDR 5.17 billion ($ 7.6 billion) equal to
500% of Pakistan's quota in the Fund. It has
increased to $11.7B. Pakistan has requested to
extend it upto 31-12-10 as it was expired on 30-09-
10.

b) The Arrangement is for a period of 23 months.

c) It is on interest rate of 3.51-4.51%. The amount

will be disbursed in seven tranches .
The first tranche of SDR 2.067 billion has been
received on 29 November, 2008 and the balance
amount will be disbursed in six quarterly
installments during 2009-10. The amount and
interest will be repaid in five Years from 2011.

Objective and Economic Program (2009-2010):

The main objectives of the Arrangement are to

i) restore confidence of domestic and external

investors by addressing macroeconomic
imbalances through a tightening of fiscal and
monetary policies; and
ii) protect the poor and preserve social
stability through a well-targeted and
adequately funded social safety net. For this
purpose the government of Pakistan has
initiated an Economic Program covering 24
months. The main elements of the Program
are:
iii) Reduce fiscal deficit: 7.4% of GDP in 2008 to
4.2% in 2009 and 3.3% in 2010
· Tighten monetary policy (increase interest rate,
eliminate government borrowing) to reduce
inflation to 6% in 2010
· Increase expenditure on social safety net (0.6%
of GDP to 0.9% in 2009) -work with World
Bank to prepare a comprehensive program of
safety net Conditionality of SBA.

OTHER MAIN POINTS:

 a) The program is subject to quarterly review and
performance criteria. The conditionality
covers actions prior to the approval of
arrangement by the IMF Board, performance
criteria, benchmarks and quantitative targets.
b) The prior actions included increasing the State
Bank's discount rate from 13% to15% as a
measure to control inflation.
c) Raise in electricity tariff by an average of
18% effective from 5 September, 2008.

Evaluation of SBA 2008-10.

The IMF arrangements can be seen from different

perspectives i.e.

It may refer to the following:

- Bail-out package.
- Investors' confidence builder.
- Economic stabilizer and revival of growth.
- Step towards greater external dependence and
source of hardship to the people, and so on.
- Ignores protecting the poor.
-Presumes that tight monetary and fiscal policies
will ensure economic revival in later years.
-Reduced government borrowings.