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Tag: pakistan economy

  • SBP reports marginal dip in bank deposits

    SBP reports marginal dip in bank deposits

    In January 2024, the total deposits held by scheduled banks in Pakistan experienced a robust year-on-year growth of 21.03 per cent, reaching Rs27.54 trillion.

    This marks a substantial increase from Rs22.75 trillion recorded in January 2023, as revealed by data released by the State Bank of Pakistan (SBP).

    However, on a month-on-month basis, there was a slight dip of 1.08 per cent in bank deposits compared to December 2024, where the total stood at Rs27.84 trillion.

    The data further highlights a positive trend in total advances, which saw a year-on-year increase of 3.74 per cent, reaching Rs12.09 trillion compared to Rs11.66 trillion in the same period last year.

     Conversely, on a monthly basis, advances experienced a marginal decline of 2.08 per cent from their December 2024 value of Rs12.35 trillion.

    The Advances to Deposit Ratio (ADR) exhibited a decrease, standing at 43.92 per cent, indicating a 732 basis points decline on a yearly basis and a 45 basis points decrease on a monthly basis.

    In terms of investments, scheduled banks in Pakistan reported total investments of Rs25.6 trillion in January 2024, reflecting a substantial year-on-year increase of 32.71 per cent from Rs19.29 trillion in January 2023.

    Additionally, there was a month-on-month increase of 1.28 per cent from the Rs25.28 trillion recorded in December 2024.

    The Investment to Deposit Ratio (IDR) witnessed a notable rise of 818 basis points, reaching 92.97 per cent, compared to the figures from January 2023. On a monthly basis, IDR increased by 216 basis points.

    These statistics indicate a significant positive shift in the financial landscape of Pakistan’s banking sector, with notable expansions in both deposits and investments.

  • Factors behind the continuous decline in car financing in Pakistan

    Factors behind the continuous decline in car financing in Pakistan

    In January 2024, the automobile financing sector in Pakistan witnessed a significant downturn, as car financing recorded a notable decrease to Rs246.26 billion.

    This marks a 25.82 per cent year-on-year (YoY) decrease and a 1.98 per cent month-on-month (MoM) decrease compared to Rs331.98 billion in January 2023 and Rs251.25 billion in December 2023, respectively. The latest data from the central bank provides these insights.

    This decline in automobile financing extends to the nineteenth consecutive month, with a total decrease of Rs114.29 billion over the past 19 months.

    Several factors contribute to this decline, including higher interest rates, increased car prices, regulatory restrictions on acquiring loans, and elevated taxes on the import of automobiles and their parts.

    According to the State Bank of Pakistan (SBP) data, consumer financing for house building amounted to Rs207.62 billion by the end of January 2024.

    This reflects a 3.44 per cent YoY decrease compared to Rs215 billion in the same month last year. Looking at monthly changes, financing for house building saw a marginal 0.26 per cent MoM decrease compared to the previous month’s Rs208.15 billion.

    Financing for personal use stood at Rs243.1 billion, showing a 4.47 per cent YoY decrease and a 0.54 per cent MoM decrease.

    Consequently, the overall credit disbursed to consumers declined to Rs813.96 billion during the review month, registering a fall of 9.04 per cent YoY and 0.52 per cent MoM.

    The outstanding credit to the private sector also experienced a decline, decreasing by 0.76 per cent YoY to Rs8.35 trillion in January 2024. On a monthly basis, this represents a 2.21 per cent decrease compared to the credit of Rs8.54 trillion in December 2023.

    Analysing credit distribution to the private sector, loans to the manufacturing sector amounted to Rs4.81 trillion in the review period, showing a slight 0.33 per cent YoY increase. However, on a monthly basis, there was an 0.89 per cent MoM decline, as December recorded loans to this sector at Rs4.85 trillion.

    Borrowing from the construction sector stood at Rs190.15 billion in January 2024, experiencing a 0.97 per cent YoY decrease and a 5.05 per cent MoM decrease compared to the previous month.

    Looking ahead, the data indicates that loans to the agriculture, forestry, and fishing sectors rose to Rs397.27 billion in the month under review, marking a significant 16.95 per cent YoY increase.

    However, on a sequential basis, loans to this sector recorded a fall of 4.82 per cent MoM.

  • 24 karat gold price surges by Rs800 per tola, silver takes a dip

    24 karat gold price surges by Rs800 per tola, silver takes a dip

    In a notable shift in the precious metals market, the per-tola price of 24 karat gold in Pakistan witnessed an increase of Rs800, reaching Rs213,200 on Saturday. This rise is compared to its previous sale at Rs212,400 on the last trading day.

    Similarly, the price of 10 grammes of 24 karat gold experienced an uptick, climbing by Rs686 to Rs182,785 from Rs182,099.  The All Sindh Sarafa Jewellers Association reported that the prices of 10 grammes of 22 karat gold also saw an increase, reaching Rs167,553 from Rs166,924.

    On the other hand, the price of per tola silver exhibited a decrease of Rs30, settling at Rs2,550. Simultaneously, the price of ten grammes of silver witnessed a decline of Rs25.72, reaching Rs2,186.21.

    Internationally, the price of gold ascended by $9, reaching $2,034 from $2,025, as reported by the Association. These fluctuations in the precious metals market reflect the dynamic nature of global economic conditions, influencing prices both domestically and internationally.

  • Political instability, IMF loan conditions threaten Pakistan’s economic growth

    Political instability, IMF loan conditions threaten Pakistan’s economic growth

    In January, Pakistan experienced a boost in economic activity, thanks to the financial aid provided by the International Monetary Fund (IMF), as reported by Bloomberg Economics Tracker.

    However, there are three key developments that may impact future economic conditions.

    Firstly, the aftermath of the inconclusive February 8 election has resulted in persistent political instability, presenting a potential obstacle to new investments.

    Secondly, there is a likelihood of more stringent conditions associated with additional IMF loans. Lastly, there is an increasing probability that the State Bank of Pakistan will delay rate cuts.

    Despite the challenges, January saw a positive trend with a 0.9 per cent increase in economic activity compared to December, breaking a four-month contraction streak.

    The injection of IMF loans and eased trade restrictions contributed to this improvement, enabling increased purchases of essential import supplies.

    Looking ahead, the unresolved election outcome may prolong political uncertainty, affecting potential investments.

    The recent hike in gas prices on February 15 will likely drive inflation higher, further reducing the chances of a March rate cut.

    Considering these developments, Bloomberg Economics is considering revising its growth outlook.

    While Bloomberg currently predicts 2.1 per cent GDP growth through June 2024 (up from a 0.2 per cent contraction in the previous fiscal year), the consensus estimate is 2.5 per cent, and the IMF forecasts 2 per cent.

    It’s essential to note that the Bloomberg Economics monthly tracker assesses inflation-adjusted indicators of activity.

  • SBP reports 26% increase in overseas workers’ remittances

    SBP reports 26% increase in overseas workers’ remittances

    In January 2024, Pakistan witnessed a notable increase in the inflow of overseas workers’ remittances, reaching $2.4 billion, as revealed by data released by the State Bank of Pakistan (SBP) on Monday. This marks a 1 per cent rise compared to December 2023, where remittances stood at $2.38 billion.

    Year-on-year analysis underscores a substantial surge, with a 26 per cent increase from the same period last year, when remittances totaled $1.9 billion in January.

    The significance of these remittances cannot be understated, as they play a pivotal role in bolstering Pakistan’s external account and fueling economic activity. Additionally, they serve as a vital supplement to the disposable incomes of households dependent on remittances.

    Despite the uptick in January, the cumulative figure for July-January FY24 reflects a 3 per cent decline year-on-year, amounting to $15.83 billion, down by $386 million from the $16.32 billion recorded in the same period of FY23.

    Breaking down the sources of remittances, overseas Pakistanis in Saudi Arabia retained their leading position, contributing $587.3 million in January 2024. This marked a 2 per cent increase from the previous month and a substantial 43 per cent rise from the corresponding period last year.

    Remittances from the United Arab Emirates (UAE) experienced a slight dip of 3 per cent month-on-month, decreasing from $419.2 million in December to $407.6 million in January. However, the yearly comparison reveals a remarkable surge of nearly 51 per cent.

    The United Kingdom witnessed a marginal decline in remittances, with $362.1 million recorded in January, down by 2 per cent from December 2023.

    In contrast, remittances from the European Union saw a significant 20 per cent year-on-year increase and a 2 per cent monthly rise, totaling $290.1 million in January 2024.

    Meanwhile, overseas Pakistanis in the United States contributed $283.4 million in January 2024, marking a notable 32 per cent increase from the same period last year.

    The consistent flow of remittances, despite fluctuations in individual sources, underscores their enduring importance to Pakistan’s economy and the livelihoods of millions of households reliant on them.

  • Pakistan’s forex reserves dip by $173 million, SBP cites debt repayments

    Pakistan’s forex reserves dip by $173 million, SBP cites debt repayments

    The State Bank of Pakistan (SBP) has reported a decrease of $173 million in its foreign exchange reserves on a weekly basis, revealing a total of $8.04 billion as of February 2, according to data released on Thursday.

    The country’s overall liquid foreign reserves are reported to stand at $13.09 billion, with commercial banks holding net foreign reserves amounting to $5.05 billion.

    The SBP has identified debt repayments as the primary factor contributing to the decline in reserves. In an official statement, the SBP stated, “During the week ending on 2-Feb-2024, SBP’s reserves decreased by US$ 173 million to US$ 8,044.0 million due to debt repayments.”

    This follows a trend from the previous week when Pakistan’s central bank reserves experienced a decrease of $54 million. The ongoing challenges related to debt servicing continue to impact the nation’s foreign exchange reserves.

  • OGRA approves massive gas tariff hike for SNGPL, SSGC consumers

    OGRA approves massive gas tariff hike for SNGPL, SSGC consumers

    In a move to address the fiscal challenges faced by Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGC), the Oil and Gas Regulatory Authority (OGRA) has granted approval for a noteworthy increase in gas tariffs.

    Effective January 1, 2024, consumers of SNGPL will experience a 35.13 per cent surge, while SSGC customers will witness an 8.57 per cent rise.

    This marks the second adjustment in gas prices within the current fiscal year, following a substantial 193 per cent increase announced by OGRA, effective November 1, 2023. The decision to implement these changes is aimed at bridging the Rs98 billion shortfall collectively faced by both gas companies.

    The interim government’s initial projections aimed to collect Rs980 billion, intending to cover the estimated revenue requirements of Rs700 billion for both SNGPL and SSGC.

    The recommended average increase in the prescribed gas price is set at 23 per cent, reaching Rs1,590 per mmbtu, compared to the previous average of Rs1,291 per mmbtu determined on June 2, 2023.

    Specifically, OGRA has outlined a 50 per cent increase (Rs415.11 per mmbtu) for SNGPL, elevating the gas price to Rs1,238.68 per mmbtu, effective July 1, 2023.

    Simultaneously, the gas price for SSGC has been raised by 45 per cent (Rs417.23 per mmbtu) to reach Rs1,350.68 per mmbtu.

    The decision to increase gas prices aligns with the interim government’s commitment to the International Monetary Fund (IMF), with an agreement to announce a raise in gas sale prices by February 18, 2024.

    However, the OGRA Ordinance stipulates that if the government remains unresponsive to OGRA’s notification within 40 days, the determined tariff by the regulator will be automatically enforced.

    The recent approval underscores the ongoing efforts to address financial challenges and ensure the sustainability of the gas sector in Pakistan.

  • ‘Pakistan’s economy performed best under Nawaz Sharif’: Bloomberg

    ‘Pakistan’s economy performed best under Nawaz Sharif’: Bloomberg

    An analysis by Bloomberg Economics reveals that Pakistan’s economy witnessed its best performance in the past three decades under the leadership of Nawaz Sharif, who served as Prime Minister thrice.

    The report compares economic indicators during Sharif’s tenure with those of his rivals, including Imran Khan’s Pakistan Tehreek-e-Insaf (PTI) and Bilawal Bhutto Zardari’s Pakistan Peoples Party (PPP), using a misery index that combines inflation and unemployment rates.

    According to Bloomberg Economics, the analysis utilized an average of the misery index values over the years when each major political party ruled Pakistan since 1990.

    The results indicate that Sharif’s Pakistan Muslim League (PML-N) outperformed both PTI and PPP in managing economic challenges.

    With general elections scheduled for February 8, Bloomberg suggests that Nawaz Sharif seems poised to return to power for the fourth time, especially as Imran Khan faces legal issues and incarceration.

    Despite Khan’s popularity, with a 57% approval rating according to a recent Gallup poll, Sharif has experienced a surge in popularity from 36% to 52% in the past six months.

    The past three decades saw the PML-N rule Pakistan four times under Sharif and his younger brother Shehbaz Sharif. The PPP under the Bhutto dynasty has held power three times, while Khan was in office for a four-year term ending in April 2022 when he was ousted from power in a parliamentary no-trust vote.

    “Bloomberg Economics used an average of the index values over the respective years when each of the major political parties ruled the country since 1990. A higher value indicates more economic hardship for citizens,” the publication said, explaining its conclusions.

    Bloomberg Economics Misery Index Results for Pakistan showed the Pakistan Muslim League scored 14.5 percent, Pakistan Tehreek-e-Insaf 16.1 percent, and the Pakistan Peoples Party 17.2 percent.

    Pakistan is currently grappling with economic challenges, including seeking a financial bailout from the International Monetary Fund (IMF).

    Inflation is close to 30 percent in Pakistan, the currency was Asia’s worst performer last year and foreign exchange reserves have slumped.

    The incoming government, as per IMF conditions, will need to implement potentially unpopular policies such as withdrawing subsidies and raising taxes. The IMF forecasts a 2% growth in Pakistan’s economy for the current fiscal year after experiencing a contraction in the previous year.

    Despite the positive economic indicators during Sharif’s governance, the report underscores the formidable tasks awaiting the new government in addressing the country’s economic hardships.

  • IMF forecasts improved inflation, slower economic growth for Pakistan in FY24

    IMF forecasts improved inflation, slower economic growth for Pakistan in FY24

    The International Monetary Fund (IMF) has adjusted its economic projections for Pakistan, providing a comprehensive review in its latest report. The key highlights include a downward revision of inflation forecasts and a moderated economic growth projection for the fiscal year 2024 (FY24).

    According to the IMF’s first review report, the inflation forecast for Pakistan has been revised down to an average of 24 per cent in FY24, showing a decline from the earlier projection of 25.9 per cent.

    This adjustment is attributed to the easing of food and energy prices, although the November gas tariff increase is expected to contribute to headline inflation in the coming months. Despite this, gradual declines are anticipated due to lower core inflation and recent movements in commodity prices.

    The year-end inflation is projected to be 18.5 per cent in FY24 and further decrease to 9 per cent in FY25, as outlined in the report.

    Conversely, the IMF has lowered its economic growth projection for Pakistan to 2 per cent in FY24, down from the initial estimate of 2.5 per cent. The revision reflects weaker domestic demand despite positive base effects from flood recovery, particularly in agriculture and the textile sector.

    The report emphasised that continued external challenges, along with tight fiscal and monetary policies, are expected to dampen consumption and private investment.

    The current account deficit (CAD) for FY24 is forecasted at $5.6 billion (1.6 per cent of GDP), below the previously projected $6.5 billion in the SBA Request. The import rebound is expected to be more restrained due to weakened domestic demand, while exports and remittances are also anticipated to be subdued.

    IMF staff anticipates the CAD to remain around 1.5 per cent of GDP over the medium term, reflecting efforts to rebuild reserves and a market-determined exchange rate consistent with sustainability.

    Despite a notable improvement in market sentiment since June, the IMF pointed out that risks to debt sustainability remain acute. Large gross financing needs and limited external financing pose challenges, and the global lender stressed that any policy slippages or insufficient financing could jeopardise the path to debt sustainability.

    Furthermore, the IMF highlighted that external financing risks are exceptionally high, and delays in the disbursement of planned financing from international financial institutions or bilateral partners could pose significant threats to the government’s programme, given limited buffers. This could lead to an increased reliance on expensive domestic financing, potentially crowding out private credit.

    In addition to economic concerns, the IMF warned that political tensions ahead of the upcoming elections may impact policy decisions and reform implementation, adding another layer of uncertainty to Pakistan’s economic outlook.

    The IMF concluded that while public debt could remain sustainable with decisive programme implementation and adequate financing, downside risks remain exceptionally high for the country, necessitating careful attention to policy measures and external support.

  • SBP receives second IMF installment, total disbursements reach $1.9 billion

    SBP receives second IMF installment, total disbursements reach $1.9 billion

    The State Bank of Pakistan (SBP) announced today that it has successfully received the second installment of SDR 528 million, equivalent to $705.6 million, from the International Monetary Fund (IMF).

    This disbursement, slated to be reflected in SBP reserves for the week ending on January 19, 2024, marks a significant step in the ongoing financial collaboration between Pakistan and the IMF.

    The latest disbursement brings the total disbursements under the stand-by arrangement (SBA) to a substantial $1.9 billion.

    It is noteworthy that the remaining $1.1 billion is expected to be received after another comprehensive review scheduled for February 2024.

    As of January 5, 2024, the State Bank of Pakistan’s total reserves stand at $8.15 billion, showcasing the positive impact of the financial support received through the IMF programme.

    To recall, Pakistan secured a $3 billion SBA from the IMF towards the end of FY23, crucially preventing the nation from defaulting on its sovereign debt.

    The disbursement of the IMF funds has been phased out over two installments, subject to meticulous reviews.

    On January 11, 2024, Pakistan successfully completed the first review of the economic reform programme, a significant milestone in ensuring the country’s financial stability.

    Following the board’s approval, the IMF highlighted that economic activity has stabilised, though acknowledging that the outlook remains challenging and is contingent on the implementation of sound policies.

    Pakistan’s 9-month SBA aims to provide a robust policy anchor for addressing both domestic and external balances, serving as a framework for continued financial support from multilateral and bilateral partners.

    This financial collaboration with the IMF is instrumental in navigating Pakistan through economic challenges, providing a solid foundation for sustained growth and stability in the region.

    The country remains committed to implementing prudent economic policies as outlined in the reform programme, with the ongoing support of international partners.