Central Bank: No decision yet to draw US Federal Reserve funds

The Central Bank ( CB) on Friday denied reports that it was pledging US$ 4.5 billion worth of US Treasury Securities to obtain a credit facility of $1 billion.

While the CB has entered into an agreement with the Federal Reserve Bank, New York to make use of a repo facility where the CB can raise $ 1billion from the Fed, no borrowings have yet been made. Withdrawing from the facility at any point is at the discretion of the CB, the banking regulator said in a statement.

However a senior Treasury official confirmed that arrangements are being made to utilise this temporary repurchase agreement facility for the purpose of enhancing the country’s reserves.

A fiscal policy decision has been taken towards this end following the lowering of interest rates to 2.00 – 2.25 per cent from 2.25- 2.50 per cent by US Fed recently, the official said.

The money will be used for urgent dollar liquidity support as the country’s economy has been badly hit by COVID-19, he opined.

Meanwhile the Finance Ministry is also planning to raise a Foreign Currency Term Financing Facility (FTFF) of up to US$500 million for the purposes of financing the expenditure as approved in the Vote on Account (VOA) for fiscal year 2020.

The estimated total expenditure for the fourth quarter this year will be in the region of Rs.1630 billion and the revenue will be around Rs. 683 billion, provisional estimates revealed.

Total revenue for the year 2020 as a whole is projected to be close to Rs. 1,775 billion with tax revenue of Rs. 1,565 billion and non-tax revenue of Rs. 200 billion

The FTFF is expected to be raised at a fixed rate or a floating rate, linked to the US$ 6 Month LIBOR or its successor with a maturity period of 1 year or more.

In response to the notice calling for Request for Proposals ( RFPs) for FTFF, several international banks and financial institutions have already submitted their prop o s a l s, Finance Ministry announced.