Draft Law by State Bank of Pakistan to Crub Fake Currency Business 
'Pakistan Times' Business & Commerce Desk

LAHORE: Governor State Bank of Pakistan (SBP), Dr. Shamshad Akhtar has said that the draft of the bankruptcy law had been prepared and it is presently being vetted to it the final shape in order to squarely deal with fake currency business.

She was addressing the members of the Lahore Chamber of Commerce and Industry (LCCI) here Tuesday.

President Lahore Chamber of Commerce and Industry (LCCI), Shahid Hassan Sheikh, Directors of the SBP- Qasim Nawaz and Muhammad Ali Malik and Chief Manager SBP, Lahore, Barbruce Ishaq were also present on the occasion.

SBP Governor said that recommendations of the task force on counterfeit currency were approved by the Prime Minister and it would soon be enforced by the central bank as a law.

Elaborating the salient features of the Monetary Policy for the year 2007-08, she said a strategic change including discount rates was devised this year to rein in inflation without hurting the interests of the trade and industrial community. In fact, the monetary policy has specifically been designed to boost investment and growth, she added.

Dr. Shamshad Akhtar said that in the absence of the measures announced in the monetary policy 2007-08, it was apprehended that currency appreciation would occur which was something which could be detrimental to the exports sector.

She said that monetary expansion was witnessed at the rate of 21 per cent last year against the target of 10 percent and the sterilization of foreign in-flows increased the bank reserves by 10 per cent. The export re-finance and the subsidies, she pointed out, provided to the textile sector accounted for more than one third of the monetary expansion.

Dr Shamshad said that the ground situation called for the discount rate to be increased by two per cent to achieve the inflation target of 6.5 per cent. Hence, the SBP decided to take other steps to control inflation that included the measures like change in re-finance distribution and other steps that enabled the bank to make a marginal

increase of 0.5 percent in the discount rate. The SBP Governor insisted that the increase in discount rate would not impact the mark-up on loans.

Despite the fact that banks have excess liquidity that would ultimately result in lower mark-up, she said the mark-up on loan was determined by the credit-worthiness of a loanee. She said some entrepreneurs with credit rating of AAA are getting credit even below the KIBOR rate. She said this year the volume of export re-finance shot up to record level. However, exports did not increase accordingly.

She deplored that some exporters misused the facility by investing the amount meant for export facilitation in the sectors like real Estate and Mutual funds.●