India last month refused to send its team to Pakistan amid heightened tensions following the November attacks on its financial hub Mumbai, which New Delhi has blamed on militants based across the border.

India’s tour cancellation cost the Pakistan Cricket Board (PCB) “at least 40 million dollars (2.8 billion rupees),” PCB chairman Ijaz Butt told reporters after addressing a hearing of the Senate’s sports committee.

He admitted that the PCB was in a “terrible financial position.”

“Emergency steps are needed, otherwise we will have no money and will have to carry a begging bowl before the government,” he said, adding that the PCB’s reserves had fallen from 3.3 billion to 1.5 billion rupees over the past two years.

Pakistan has been a virtual no-go zone for foreign teams since the September 11, 2001 attacks on the United States, which sparked major security fears for teams concerned about suicide and other attacks.

The cancellation of India’s tour was the third major cricket event called off in Pakistan last year, after Australia refused to tour in March and the ICC postponed the elite eight-nation Champions Trophy set for August 2008.

Rescheduled for September-October this year, the Champions Trophy is likely to generate five million dollars for Pakistan if it goes ahead, Butt said.

Butt also said that he inherited a troubled financial set-up when he joined the PCB as chairman last year.

“Our finances stood at 42 million dollars in October 2006, but when I took over as the chairman in October last year it was just 19 million dollars,” Butt told the committee.

The PCB convinced Sri Lanka to replace India who will tour Pakistan in two segments, playing three one-dayers from January 18 and then returning in February for a two-Test series.

Butt said he fears Australia will not tour Pakistan later this year but added that three neutral venues — Malaysia, the United Arab Emirates and England — were options in ensuring the series goes ahead.

“We want to host Australia in Pakistan but if they have their security concerns, these are the three venues which will come up for discussions when I meet officials of Cricket Australia in Perth later this month.”

The PCB chairman is due to attend ICC’s executive board meeting from January 31-February 1 in Perth, Australia. -AFP

Pakistan’s banking sector has remained remarkably strong and resilient, despite facing pressures emanating from weakening macroeconomic environment since late 2007, said the SBP report.

However, the report cautioned that excessive dependence on the banking system to meet the financing needs of economy, as well as other participants of the financial sector, is quite stark in comparison with other emerging economies, where in general, the growth in other components of the financial sector, such as capital markets, and complements supplements the financing capacity of the banking sector.

The report also bitterly criticised the long suspension of capital market operation through floor system which it said shocked the economy.

While financial markets (money market and foreign exchange market) remained resilient to developments in the macroeconomic environment and functioned well in maintaining financial stability, the imposition of the floor of 9,144 points on the KSE-100 index in August 2008 has adversely impacted investor sentiments by effectively blocking the exit mechanism generally taken for granted in a market based system, said the report.

Incidentally, there is no known precedent of placing a floor on a market index, albeit temporary suspension of trading in equity market has been implemented in some cases as an extreme measure, it said.

The review said the banking system is on strong footing and has long term potential – a feature which has served to attract a substantial amount of FDI in the sector, with established global financial institutions now active participants in the domestic financial sector.

The report states that with strong regulatory oversight, there has been a significant enhancement of capital and risk-weighted capital adequacy, supported by high provisioning requirements which were tightened in 2007.
Stringent loan provisioning requirement has built sufficient reserves against the nonperforming loans [NPL]s’ portfolio.

“In contrast to the liberalised financial system in the west which took its toll in the form of the current global financial crisis, there are stringent regulations and adequate policies in place to help the banking system manage its risks,” said the report.

The Report said solvency profile has improved, and given the pressures from the macroeconomic environment, there is an indication of marginal deterioration in asset quality, which banks are well-equipped to handle.

Stress tests conducted on June-2008 data indicate that the large banks are relatively robust, with the medium and small-sized banks positioning themselves in niche markets, it added.

Capital adequacy of the banking system is strong, 12.1% at end-June 2008, well above the internationally acceptable minimum requirement of 8.0%, it said and added core capital constitutes about 80.0% of the total capital, and Tier 1 to risk weighted assets ratio of the banking system is at 9.7%.

“This strong capital base is accompanied by adequate reserves on the back of stringent provisioning requirements against classified assets – the net NPLs to net loans ratio is reasonably well-contained ie at 1.3% in June 2008, comparable to international best standards,” the report said.

Profitability of the banking system continues to be impressive, largely emanating from the persistent growth in high-yield earning assets and expanded business volumes.

Before-tax Return On Assets of the banking system remains strong at 2.3% in June 2008. The strengths built up over the years are now coming in handy in managing the recent financial strains.

The Report mentioned that the demand for credit from both the government and the private sector resulted in liquidity strains faced by some individual banks, which also emanated from the combined impact of their weak deposit mobilisation and low interest rates offered on deposits.

The government and public sector organisations’ excessive borrowings from the banking system posed another challenge for the banking system.

Notwithstanding, the liquidity strains were temporary and the inter-bank market is now functioning normally. — Internews

“Our borrowings are below the target. We are meeting all the targets of IMF and I have no worries about it”, he added.

Responding to a question, the Advisor said the government will consider lowering discount rates when core inflation starts coming down. The current rate of inflation is 24 percent in the country while the core inflation was hovering at 18.9 percent, he added and hoped that core inflation will come down soon.

Talking of oil prices, he said that the government has lowered petrol prices by Rs 30 per litre or more than 40 percent since international oil prices have started slipping.

“We have reduced petrol price from Rs 87 to about Rs 57 a litre On the contrary, our neighbour India has reduced petrol price by only Rs 5 per litre”, he opined.

Tarin said that the government will fully pass on the reduction in oil prices at a suitable time. Presently, we cannot fully pass on the benefit of oil price cut keeping in view the situation on the borders and pressure on the revenue collection, he noted.

Replying to a question about the meeting at Pak‑Oman Investment Ltd, he said that it was in connection to have a review of financial sector in the country specially state‑owned entities.

The government had invested billions of rupees in these organisations and we want to see whether the private sector is benefitted with this money or not. What is the return and what are the benefits, he maintained.

“I am hopeful that this review will bring in improvement in the performance of financial sector”, he observed.

To another question, the Advisor said that the inflow of foreign direct investment (FDI) in the first five months of current fiscal is up by at least 1 to 2 percent over last year’s (2007‑08) figure of $ 1.7 billion.

Referring to steps for strengthening the capital market, he pointed out that energy, telecom and banking sectors were going strong and investment inflow will increase in the country.

Tarin said that Treasury Stock Ordinance will be promulgated in next two days to allow public sector corporate sector to buy their own shares at low prices and sell them when they are up.

At the same time we have provided a soft lending in stock market to provide sufficient funding. This will certainly support the market, he added.

To a question about the privatisation of Qadirpur gas field, he said the Prime Minister Yousuf Raza Gilani has already made it clear on the floor it will be done after due consultation.

He said that only 10 to 15 percent employees of Pakistan Steel Mills will be privatized.

Tarin said that he will also meet private sector people to get their input on the economy and also about their problems. We will also solve their problems, he added.

Responding to a question about the Friends of Pakistan, he said that time was right to have a meeting with them because the United States was in a transition period. Let the new government take over in USA. Meanwhile we are holding individual meetings with member countries. I am going to Saudi Arabia to hold meeting with its finance minister, he pointed out.

Earlier, CEO Pak‑Oman Investment Company Ltd Zafar Iqbal briefed the Advisor on the performance of the investment company.