Pakistan Banao Certificate attracts lukewarm demand with $20 million sale till February

ISLAMABAD: The government has so far raised around $20 million from Pakistan Banao Certificate (PBC) – an instrument issued in January to attract foreign exchange reserves from expats, a senior official said on Friday.

The official of the State Bank of Pakistan (SBP) told The News that total investment into PBC amounted close to $20 million from Pakistanis having bank accounts abroad.

Sources said the government is eyeing $300 million to $500 million in investment into the certificates till June 30, but the response has so far not been up to the desired mark.

The SBP’s official countered the argument.

“We expect that it will pace up in the remaining period of the current fiscal year,” the official said, requesting anonymity.

The government launched a new scheme in late January to encourage millions of Pakistanis living abroad to pour their dollars savings into PBCs, as it strives to improve dwindling foreign exchange reserves that has hit the economy. PBC is a primary market instrument. The dollar-denominated PBCs are being offered at higher yields than foreign bonds. The latest offering is 100 percent guaranteed by the government. The minimum investment limit is $5,000 with no upper limit.

The government issued new rules related to premature encashment in US dollars of PBCs, issued with effect from January 31.

There will be deduction on principal amount in US dollar ranging from 1.125 percent to 1.875 percent on premature encashment of three years and 1.375 percent to 3.125 percent on five years tenor, according to the new rules.

The ministry, in statutory regulatory orders (SROs 105 (1) and 106 (1) 2019) issued earlier this week, said PBC with three year tenor will have profit rate of 6.250 percent of the principal amount per annum and 6.750 percent for five-year tenor.

The ministry said there will be a deduction of 1.125 percent of the principal amount, in case of premature encashment in US dollar of three-year certificate, before the lapse of one year where six monthly profits are paid or accrued.

“After completion of one year but before lapse of two years, a deduction of 1.5 percent of the principal amount shall be made with an additional deduction of 0.75 percent of the principal amount where six monthly profit has been paid or has accrued in second year,” it added.

“After completion of two years but before the lapse of three years, a deduction of 0.750 percent of the principal amount shall be made for each of the two completed years with additional deduction of 0.375 percent of the principal amount where six monthly profit has been paid or has accrued in third year.”

There will be a deduction of 1.375 percent of the principal amount on five-year tenor certificate – in case of premature encashment in US dollars before lapse of one year – if six monthly profits are paid or accrued.

“After completion of one year but before lapse of two years, a deduction of 2 percent of the principal amount shall be made with an additional deduction of 1 percent of the principal amount where six monthly profit has been paid or accrued in third year,” the ministry said.

“After completion of three years but before lapse of four years, a deduction of 0.5 percent of principal amount shall be made for each of three years completed with an additional deduction of 0.250 percent of principal amount where six monthly profit has been paid or has accrued in the fourth year.”

There will be a deduction of 0.250 percent for each of the four years completed, before lapse of five years, according to the new rules.