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The Pakistani rupee was put in circulation after the country became independent in 1947.

The currency was decimalized in 1961, with the rupee subdivided into 100 paise (singular

ISSUING AUTHORITY: State Bank of Pakistan

The Pakistani rupee declined against the USA dollar until the start of the century, when
Pakistan's current account surplus pushed the rupee up.
The inflation pressures (and outlook), that caused concerns until 2005, at last began to
ease in 2006, potentially in response to both, tight monetary policy pursued by SBP,
which arrested the uptrend in core inflation, and better supply management of essential
food items by the Government of Pakistan, which helped a fall in broad inflation.

In Pakistan KIBOR Rates is often an important statistic. These are Karachi Interbank
Offered Rates (KIBOR) KIBOR-Rates

KIBOR is the average asking price of the loans to be made by one bank to another, it has
nothing to do with the banks lending to corporates. That is why when banks quote
KIBOR-based prices for loans to their customers, it is the premium they demand over
KIBOR, and not KIBOR itself that really takes into account the credit worthiness of the
borrower and the prospects of loan recovery or default. KIBOR is defined as the Average
rate, Ask Side, for the relevant tenor, as published on Reuters page KIBOR or as
published by the Financial Markets Association of Pakistan in case the Reuters page is

It is Karachi Inter Bank Offer Rate (KIBOR), given by specialized institution on daily,
weekly, monthly and on 1, 2 and 3 yearly basis to all the commercial banks of Pakistan
so that they charge interest to their customers on that basis. This rate is inflation-adjusted
rate and then banks by adding 2 or 3% in KIBOR rate charge their customers for their

21st January, 2004

The State Bank of Pakistan (SBP) and the Pakistan Banks Association (PBA) have asked
the banks to use Karachi Interbank Offered Rate (KIBOR) of one, three, sixmonth and
longer tenors, as made available, as the benchmark rate for all corporate lending in Pak.
rupee after 31st January, 2004.
This was decided at a meeting held in Karachi today under the Chairmanship of the
Deputy Governor, State Bank of Pakistan, Mr. Tawfiq A. Husain and attended by the
Chief Executives of all banks and senior SBP Officials.
A press release jointly issued by the SBP and PBA after the meeting said that this
benchmarking has been done with a view to encourage transparency, promote
consistency in market based pricing and improve management of the market risk
undertaken by banks.
According to the press release, the benchmarking will apply to all Pak Rupee
denominated Floating and Fixed Rate Time Loans, Term Finance Certificates (TFCs) and
Commercial Papers (CPs) with reset dates (where applicable) within the available
KIBOR tenors of upto six months presently, which is to be increased to twelve months
tenor by March 31, 2004 and thereafter to three years by December 31, 2004. The
benchmarking requirement will also apply to Overdrafts (ODs) and Running Finance
obtained/renewed after 31st January 2004.
The SBP & PBA have issued the following instructions to banks for benchmarking their
corporate lending rates to KIBOR:
KIBOR has been defined as the Average rate, Ask Side, for the relevant tenor, as
published on Reuters page KIBOR or as published by the Financial Markets Association
of Pakistan in case the Reuters page is unavailable.
The banks and the borrowers will be free to decide the relevant tenor of KIBOR and the
spread over KIBOR at their discretion. KIBOR will be set for the lending facility on the
date of drawdown or on the markup-reset date. The offer letters from the banks to their
clients should clearly indicate the KIBOR’s tenor and the agreed spread, frequency of
revision etc.
The press release said that it has been also decided that the requirement to use
KIBOR as the benchmark rate will not be applicable for the following: (a) Export
Finance Scheme (EFS) of the State Bank of Pakistan (b) Consumer Financing and SME
Lending, as defined in SBP Prudential Regulations (c) Overdrafts and Running Finance
facilities existing before January 31, 2004 (d) Term Finance Certificates/Commercial
Papers approved by the Securities and Exchange Commission of Pakistan (SECP) and/or
submitted to any Stock Exchange prior to January 31, 2004 and (e) all Time Loans with
agreements executed before January 31, 2004. However, if the pricing is renegotiated, the
pricing of such loans will need to be benchmarked to KIBOR within the available tenors.
The press release pointed out that the financing rates under EFS would continue to be
determined as per instructions issued by the Banking Policy Department of the State
Bank of Pakistan and Overdrafts and Running Finance facilities extended prior to 31st
January, 2004 must be benchmarked to KIBOR at the time of renewal of the facility or
when the same is due for repricing.
The State Bank of Pakistan, through a circula r, has asked the banks to comply with the
above-mentioned requirements regarding benchmarking of their corporate lending to
KIBOR. It also asked the concerned quarters to report the instances where the banks do
not follow the requirements of using KIBOR as a benchmark. The State Bank has
cautioned the banks that it will take appropriate regulatory actions, if any violation is
committed in his regard, the press released added.

Borrowers to benefit from cut in KIBOR: SBP

Thursday, 19 March 2009 00:00
KARACHI: State Bank of Pakistan Governor Syed Salim Raza has expressed hope that
borrowers will soon benefit from the reduction in Karachi Inter-bank Offered Rate
(KIBOR) as the discount rate does not directly impact the borrowing cost.
Raza said economic indicators have started improving and in particular foreign exchange
reserves are stable, and liquidity in the financial system has resulted in a significant drop
in the KIBOR.
He was speaking during a visit to the Karachi Stock Exchange (Guarantee) Ltd for a
lunch hosted by the KSE board of directors on Wednesday.
The KSE members discussed key matters regarding the capital market. The central bank
governor requested the KSE to focus on trading of debt instruments electronically
through the exchange.
The SBP governor was also told about the development of margin trading and how the
SBP, Central Depository Company and KSE may cooperate to promote investor

KIBOR-[The Monetary Policy] Effects

The values on KIBOR were not available before 2002. Thus the KIBOR effect is specific
to the sample from January 2002 to December 2008 for daily data after making necessary
adjustment in the frequency of KIBOR compatible to the frequency of Exchange rate
series. The analysis in this section focuses on the effects of KIBOR on the volatility of
exchange rates and also compares its impact on the capital gains from the investment in
the five foreign currencies under discussion. The results have been reported in the Table
5 and Table 6 below.