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Tag: SBP

  • State Bank of Pakistan reports $21 million decline in forex reserves

    State Bank of Pakistan reports $21 million decline in forex reserves

    Pakistan’s total liquid foreign reserves reached a sum of $13,030.8 million, with the central bank holding reserves amounting to $7,615.4 million, as reported by the State Bank of Pakistan (SBP). 

    According to a statement released by the State Bank of Pakistan on Thursday, during the week ending on September 28, 2023, SBP’s reserves experienced a decrease of $21 million, resulting in a total of US$ 7,615.4 million. Concurrently, commercial banks held net foreign reserves totaling $5,415.4 million. 

    In the preceding week, ending on September 22, 2023, the country’s total liquid foreign reserves were reported at US$ 13.162 billion. Among these, the central bank held foreign reserves amounting to $7.636 billion, while commercial banks held net foreign reserves of $5.525 billion. 

    As of September 29, the total liquid foreign reserves of Pakistan stood at US$ 13.18 billion, with the central bank’s reserves totaling $7,636.7 million. The State Bank of Pakistan (SBP) spokesperson attributed the decrease in SBP’s reserves by $59 million to debt repayments during the week ending on September 22, 2023. Net foreign reserves held by commercial banks amounted to $5,525.1 million. 

    In the week ending on September 15, 2023, the country’s total liquid foreign reserves were recorded at $13.186 billion. Among these, the central bank held foreign reserves amounting to $7.695 billion, while commercial banks held net foreign reserves totaling $5.491 billion. 

  • State Bank maintains interest rate at 22% as inflation takes a breather 

    State Bank maintains interest rate at 22% as inflation takes a breather 

    The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has announced its decision to maintain the key policy rate at 22 per cent, as outlined in their official statement released today. 

    The decision to uphold the policy rate at 22 per cent was reached after careful consideration by the MPC, which took into account various economic factors. One of the pivotal factors influencing this decision was the recent trend in inflation.

    In particular, the MPC noted a significant decline in inflation from its peak of 38 per cent in May to 27.4 per cent in August 2023. This trend, coupled with the expectation of a continued downward trajectory in inflation, was a key factor in maintaining the current policy rate. 

    Despite recent increases in global oil prices, which have been passed on to consumers through adjustments in administered energy prices, the MPC remains confident in the outlook for inflation, particularly in the latter half of the year. This optimism is based on several factors, including the positive territory of real interest rates on a forward-looking basis.

    Additionally, the expected alleviation of supply constraints due to improved agricultural output and recent administrative measures against speculative activities in the foreign exchange and commodity markets are anticipated to support a favorable inflation outlook. 

    The MPC also highlighted four noteworthy developments that have occurred since its last meeting in July: 

    1. Improved Agricultural Outlook: The latest data on cotton arrivals, improved input conditions, and satellite data indicating healthy vegetation for other crops have contributed to an improved outlook for agriculture. 

    2. Rising Global Oil Prices: Global oil prices have experienced an upward trajectory and are currently hovering around the $90/barrel level. 

    3. Current Account Deficit: As expected, the current account shifted from surplus to deficit in July, partly attributed to the recent relaxation of import restrictions. 

    4. Positive Regulatory Measures: Recent administrative and regulatory actions aimed at enhancing the availability of essential food commodities and curbing illegal activities in the foreign exchange market have started to yield positive results, narrowing the gap between interbank and open market exchange rates. 

    The SBP’s MPC affirmed its commitment to closely monitoring risks to the inflation outlook and expressed its readiness to take appropriate actions when necessary to achieve the objective of price stability.

    Furthermore, the MPC highlighted the importance of maintaining a prudent fiscal stance to manage aggregate demand effectively. This fiscal responsibility is seen as crucial to achieving the medium-term target of 5-7 per cent inflation by the end of the fiscal year 2025. 

  • SBP expected to hike interest rates by at least 150 bps to control inflation

    SBP expected to hike interest rates by at least 150 bps to control inflation

    The State Bank of Pakistan (SBP) is expected to hike interest rates by at least 150 basis points (bps) on Thursday in an effort to curb sky-high inflation and bolster diminished foreign exchange reserves. 

    The central bankas already raised its benchmark rate by 12.25 per cent points to 22 per cent since April 2022, but inflation remains in double digits, at 27.4 per cent in August. The rupee has also depreciated sharply in recent months, reaching an all-time low of 200 rupees per dollar. 

    A Reuters poll of 17 analysts shows that 15 are forecasting a rate hike, with nine predicting an increase of at least 150 bps. The other two analysts expect the rate to remain unchanged. 

    The SBP is under pressure to raise rates in order to cool inflation and attract foreign investment. However, a rate hike could also dampen economic growth, which is already slowing. 

    The central bank is also facing challenges from the International Monetary Fund (IMF), which has set conditions for the release of further tranches of its $3 billion bailout package. One of these conditions is that the SBP must raise interest rates. 

    The SBP is likely to balance these competing considerations when it makes its decision on Thursday. However, it is clear that the bank is under pressure to take action to address the country’s economic challenges. 

    Here are some additional details about the factors that are likely to influence the SBP’s decision: 

    • Inflation: Inflation remains a major concern for the SBP. The latest data shows that inflation fell slightly in August, but it remains in double digits. The SBP has said that it expects inflation to decline over the next 12 months, but it is unclear whether this will happen without further monetary tightening.  
    • Foreign exchange reserves: The SBP’s foreign exchange reserves have been declining in recent months, reaching a critical level of $10.3 billion in August. The SBP needs to bolster its reserves in order to meet its import obligations and avoid a sovereign debt default. A rate hike could help to attract foreign investment and slow the decline in reserves.  
    • IMF conditions: The IMF has set conditions for the release of further tranches of its bailout package. One of these conditions is that the SBP must raise interest rates. The SBP is likely to comply with this condition in order to secure the IMF’s support. 

    The SBP’s decision on Thursday will be closely watched by markets and investors. A rate hike is likely to be welcomed by those who are concerned about inflation, but it could also dampen economic growth. The SBP is facing a difficult balancing act, and its decision will have a significant impact on the country’s economic outlook. 

  • Pakistani rupee sets new record, falls to Rs307.10 per US dollar 

    Pakistani rupee sets new record, falls to Rs307.10 per US dollar 

    In the interbank market on Tuesday, the Pakistani rupee (PKR) continued to weaken against the US dollar, losing PKR 1.4569 (0.48 per cent) on a day-over-day basis and ending the session at PKR 307.0996 per US dollar.

    On Monday, the Pakistani rupee experienced a slight decline against the US dollar, settling at Rs305.64 in the interbank market.

    The government has not yet finalised relief measures for the surging electricity bills of consumers, primarily due to disagreement between the federal government and the International Monetary Fund (IMF) regarding the provided data.

    On the international front, the US dollar remained strong on Tuesday, while the Australian dollar faced some pressure. Traders were closely monitoring the Reserve Bank of Australia’s upcoming interest rate decision, speculating that interest rates may have reached their peak.

  • SBP likely to hike key policy rate by up to 300 basis points next month

    SBP likely to hike key policy rate by up to 300 basis points next month

    The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will likely meet at its upcoming meeting to decide on the key policy rate, and the market anticipates a possible rate increase of up to 300 basis points.

    According to the analysts contacted by the Brecorder, the SBP is likely to increase the rate from its current historic high of 22 per cent. As per the advance calendar issued in July, the SBP is currently slated to hold its MPC meeting on September 14.

    Notably, the central bank has previously taken the initiative to declare changes in its key policy rate through ’emergency’ meetings, similar to what occurred in June.

    Market speculation hints that the central bank might adopt a more patient approach this time, making an emergency meeting less probable.

     Tahir Abbas, the Head of Research at Arif Habib Limited (AHL), foresees a rate hike ranging between 100 and 150 basis points.

    He emphasised, the inflation rate is projected to remain elevated not only in August but also in the upcoming months. Furthermore, the persistent depreciation of the currency might compel the SBP to push interest rates upwards.

    Abbas added, “We expect a policy rate hike of around 100-150 bps.”

    In a previous report, AHL stated that headline inflation is expected to climb higher in August, surpassing the 28.3 per cent figure recorded in July 2023.

  • SBP-held forex reserves rise by $12 million to $8.05 billion, sufficient to cover over two months’ worth of imports

    SBP-held forex reserves rise by $12 million to $8.05 billion, sufficient to cover over two months’ worth of imports

    The State Bank of Pakistan (SBP) announced a rise of $12 million in its foreign exchange reserves, reaching $8.05 billion, as detailed in a statement released on Thursday. The nation’s overall liquid foreign reserves, encompassing both SBP and commercial banks, amounted to $13.379 billion as of August 11. Among these, commercial banks held net reserves totaling $5.3237 billion, as reported by the SBP.

    While the central bank did not provide specifics on the cause behind the augmentation of foreign exchange reserves, the situation presents an upbeat stance. Nevertheless, it’s worth noting that the existing reserves would barely cover imports for a span slightly exceeding two months.

    Notably, the previous month saw a notable escalation in SBP reserves due to inflows from the United Arab Emirates, Saudi Arabia, and the International Monetary Fund (IMF), following the formalisation of a $3 billion Stand-by Arrangement (SBA) with the global financial institution.

    According to Geo, in a departure from market predictions, the SBP opted to maintain the key policy rate at 22 per cent during the preceding month. This stance diverged from expectations, particularly those guided by IMF recommendations. SBP Governor Jameel Ahmed conveyed this decision following a Monetary Policy Committee (MPC) meeting. Explaining the rationale, he stated that given the decline in inflation, there was no inclination to increase the interest rate.

    During a press conference, Governor Ahmed also shared insights into the nation’s economic trajectory. He projected a growth rate ranging from 2 per cent to 3 per cent for the upcoming year. Highlighting the government’s actions, he mentioned the complete removal of import restrictions. This move, coupled with financial inflows from the IMF and other supportive nations, led to a $4.2 billion upswing in Pakistan’s foreign exchange reserves in July.

  • Pakistani rupee drops to Rs295 against US dollar

    Pakistani rupee drops to Rs295 against US dollar

    It appears that the Pakistani rupee is poised to shatter previous records and reach an new all-time low, as the local currency continued its decline against the US dollar on Wednesday, decreasing by 1.16 per cent in the inter-bank market.

    By the end of the day, the rupee settled at Rs294.93 against the US dollar, marking a decline of Rs3.42, as reported by the State Bank of Pakistan (SBP).

    This represents its lowest point since May 11 of this year, when it hovered near Rs299.

    Just one day prior, on Tuesday, the rupee also experienced a setback against the US dollar, concluding at Rs291.51.

  • Pakistan’s current account surplus soars to $334 million in June

    Pakistan’s current account surplus soars to $334 million in June

    The State Bank of Pakistan (SBP) has reported that Pakistan’s current account has achieved a surplus for the fourth consecutive month, reaching $334 million in June 2023.

    This marks a significant improvement compared to the previous year when the current account recorded a deficit of $2.32 billion during the same period. The sustained monthly surplus trend began in March 2023.

    The primary factors contributing to this surplus, as highlighted by Arif Habib Limited (AHL), a reputable brokerage house, are a notable 55 per cent year-on-year decline in total imports and a 29 per cent year-on-year decrease in exports. Furthermore, remittances experienced a 22 per cent year-on-year decrease.

    Data from the central bank reveals that Pakistan’s exports in June 2023 increased to $2.698 billion, in contrast to the total goods and services export value of $3.794 billion in June 2022.

    Conversely, total imports amounted to $3.847 billion in June 2023, down from $8.533 billion in the corresponding period of the previous year.

  • Pakistan’s foreign exchange reserves rise to $8.4 billion

    Pakistan’s foreign exchange reserves rise to $8.4 billion

    Foreign exchange reserves held by the State Bank of Pakistan (SBP) have surged by over $4 billion following a deposit of $1.2 billion from the International Monetary Fund (IMF).

    As per data shared by the central bank, Pakistan has also received $1 billion from the UAE and $2 billion from Saudi Arabia, resulting in a significant increase in the SBP’s foreign exchange reserves, which now stand at $8.4 billion.

    During a televised address earlier today, Finance Minister Ishaq Dar stated that Pakistan’s foreign exchange reserves are projected to reach approximately $13-$14 billion by July 14.

    He emphasised that Pakistan is experiencing a resurgence in development and prosperity. Minister Dar acknowledged the instrumental role played by Prime Minister Shehbaz Sharif in reaching an agreement with the IMF, highlighting the unwavering support provided by the economic team throughout the intricate process.

    It is noteworthy that the International Monetary Fund granted approval for a $3 billion loan to Pakistan, subsequent to the signing of a staff-level agreement last month.

  • Pakistan receives $1.2 billion deposit from IMF

    Pakistan receives $1.2 billion deposit from IMF

    The State Bank of Pakistan (SBP) has received a substantial deposit of $1.2 billion from the International Monetary Fund (IMF), offering a glimmer of hope to the economically strained nation that has been on the verge of default for an extended period.

    This deposit follows the approval by the IMF’s executive board, during a late-night session, of a nine-month programme under a $3 billion Stand-By Agreement (SBA). The agreement, reached after arduous negotiations over fiscal discipline lasting eight months, marks a significant milestone for Pakistan.

    Last month, Pakistan successfully reached a staff-level agreement with the IMF, securing a short-term pact that exceeded expectations in terms of funding for the country, which is home to 230 million people. This achievement is of particular importance given the acute balance of payments crisis that Pakistan faced, with its central bank reserves barely sufficient to cover a month’s worth of controlled imports.

    During a televised address from Islamabad, Finance Minister Ishaq Dar expressed that Pakistan will receive the remaining balance of the agreed amount following two reviews. The first review is scheduled for November, while the second review will take place in February.

    These reviews are crucial milestones that need to be met to ensure the disbursement of the funds by the IMF, thus supporting Pakistan’s pursuit of economic stability.