 Pakistan's banks often prefer to buy debt than lend money |
Pakistan's banks are being pushed out of the money markets and into real-world investing, on the orders of the country's central bank. For years, bankers in Islamabad, Lahore and Karachi could make safe money by backing government bonds, the income from which was more than 6% a year as recently as July last year.
But now the State Bank of Pakistan is deliberately driving returns to rock-bottom levels.
The result has been a fall in the average yield, or return, on six-month Treasury bills, as government bonds are termed, to an all-time low of 1.21% earlier in July.
The State Bank makes no secret of the fact that it is trying to force the banks to pay more attention to real-world investments in companies and lending to individuals. Some Pakistani banks invest as much as half their deposits in treasuries, well above the proportions usual elsewhere.
"It is not a bank's job to sit home and get a big spread on treasury bills and make money in the money market," State Bank Governor Ishrat Husain told reporters in Karachi.
"I have no sympathy. This is a deliberate policy of the state bank, that the banks should go and use their resources for productive sections of the economy."
The move follows hard on the heels of attempts at the Karachi Stock Exchange - the country's premier share market - to slap down "wildcat" speculative trading in favour of more long-term investment.
The exchange's decision to increase the amount of assets brokers have to keep in reserve against the revolving loans they routinely use to fund trading - known as "badla" - triggered a sharp fall in the market.
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"It is not a bank's job to sit home and make money in the money market... I have no sympathy 
