Tag: economic conditions

  • State Bank of Pakistan maintains policy rate at 22% despite inflation concerns 

    State Bank of Pakistan maintains policy rate at 22% despite inflation concerns 

    The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) convened today to deliberate on the prevailing economic conditions and has resolved to maintain the policy rate at 22 per cent for the fourth consecutive meeting. 

    This decision aligns with market expectations, as a majority of market participants were in agreement regarding the rate remaining unchanged. 

    The Monetary Policy Statement issued by the central bank indicates that the decision takes into consideration the impact of the recent increase in gas prices on November’s inflation, which exceeded the MPC’s earlier projections.  

    The Committee acknowledged the potential implications of this on the inflation outlook while also noting offsetting factors such as the recent decline in international oil prices and the improved availability of agricultural produce. 

    Additionally, the Committee conducted an assessment indicating that the real interest rate remains positive over a 12-month forward-looking horizon and anticipates a downward trajectory for inflation. 

    Key developments since the October meeting were considered by the MPC. Firstly, the successful completion of the staff-level agreement for the first review under the IMF SBA programme, which is expected to unlock financial inflows and enhance the SBP’s foreign exchange serves, 

    Secondly, the quarterly GDP growth for Q1–FY24 met the MPC’s expectations for a moderate economic recovery. 

    Lastly, consumer and business confidence surveys reflected positive sentiment improvements. Lastly, core inflation persists at elevated levels, showing a gradual reduction. 

    Considering these developments, the Committee determined that the existing monetary policy stance is conducive to achieving the inflation target of 5-7 per cent by the end of FY25. 

    The Committee emphasised that this assessment is contingent on the sustained implementation of targeted fiscal consolidation and the timely realisation of planned external inflows. 

  • IMF wants Pakistan to implement property and agriculture tax

    IMF wants Pakistan to implement property and agriculture tax

    The International Monetary Fund (IMF) has recently granted Pakistan a $3 billion loan, subject to certain conditions that require a second review.

    According to reports, the Washington-based institution has asked the Pakistani government to devise a plan for implementing taxes on the real estate and agricultural sectors, with the aim of bolstering the country’s revenue generation.

    The IMF perceives a potential for Pakistan to enhance its revenue through taxation of these two sectors.

    Should the plan devised by the Federal Bureau of Revenue (FBR) gain approval from the IMF, it will result in the release of a mini-budget. However, the decision to impose taxes on the property and agriculture sectors ultimately rests with the new government.

    Additionally, sources indicate that assistance will be sought from the World Bank to facilitate the taxation of these sectors.

    It is worth noting that Pakistan recently received the initial disbursement of $1.2 billion from the IMF.

    IMF officials emphasise that Pakistan must fulfill the conditions outlined in the agreement to achieve economic stability.

    Prime Minister Shehbaz Sharif has also assured the IMF Managing Director of the government’s commitment to implementing the agreement in its entirety.

  • Remittances in June 2023 decline by 21.4%, hitting $2.2 billion: SBP

    Remittances in June 2023 decline by 21.4%, hitting $2.2 billion: SBP

    In June 2023, remittances experienced a year-on-year decrease of 21.4 per cent, falling to the $2.2 billion mark compared to $2.8 billion in June 2022, according to data released by the State Bank of Pakistan (SBP).

    Simultaneously, cumulative remittances sent by overseas Pakistanis for the 12-month period ending on June 30, 2023, diminished to $27 billion, reflecting a 14 per cent decline in the financial year 2022-23 when compared to the record-high inflows of $31 billion reported in the previous financial year.

    In terms of monthly trends, remittances received by the country from overseas Pakistanis increased by 3.85 per cent from $2.102 billion in May to $2.18 billion in June 2023.

    The primary sources of remittance inflows during June 2023 were Saudi Arabia ($515 million), the United Kingdom ($343 million), the United Arab Emirates ($325 million), and the United States ($272 million).

    Moreover, proceeds from expatriates residing in European Union countries showed an 11 per cent month-on-month increase in June 2023, amounting to $272 million. Similarly, remittances from other GCC countries (Bahrain, Kuwait, Qatar, and Oman) totaled $271.9 million.

    The decline in inflows reported for FY23 can be attributed to various austerity measures implemented by the coalition government and the banking regulator. These measures included high taxes on cash held in banks and exchange companies, aimed at increasing remittance collections.

    Import restrictions, coupled with unfavorable domestic economic conditions during FY23, had a detrimental impact on remittance inflows. These factors resulted in reduced demand and led to a diversion of a significant portion of expatriate inflows towards informal currency exchange channels.

    Fundamentally, the contraction in imports caused by policy measures, along with demand suppression, exchange rate depreciation, and the preference for undocumented channels to maximise profits, all contributed to curbing remittance inflows during FY23. As a consequence, the expatriate Pakistani community residing in various countries faced inadequate facilitation.

  • Diamond Industries suspends manufacturing operations due to unavailability of raw materials

    Diamond Industries suspends manufacturing operations due to unavailability of raw materials

    A major manufacturer of foam products in Pakistan, Diamond Industries Limited has announced to suspend its manufacturing operations from today owing to a shortage of imported raw material.

    The company informed the Pakistan Stock Exchange about the closure in a notice.

    “Due to adverse economic conditions in the country and non-availability of imported raw material, the company has suspended its manufacturing operations for a short term with effect from Tuesday, January 10, 2023, till further notice subject to the availability of imported raw material in the country,” read the notice.

    The announcement follows several companies announcing reductions in production or shutdowns of operations due to slow sales and low inventory.

    It is worth noting that Diamond Industries has been known for selling foam products in the country for more than three decades.

    Experts believe that the situation of industrial sector does not seem to improve soon.