Tag: Financial Trends

  • 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.

  • PKR registers only 0.92% rise against US dollar since the onset of 2024

    PKR registers only 0.92% rise against US dollar since the onset of 2024

    The Pakistani rupee (PKR) maintained its upward trajectory for the 13th consecutive week, gaining 12.88 paisa against the US dollar and settling at PKR 279.28 per USD.

    This positive momentum marks a notable shift from the previous week’s closing rate of PKR 279.41 per USD.

    Analysing the broader financial trends, the PKR has appreciated against the US dollar by 6.71 rupees, or 2.4 per cent, during the current financial year. Looking at the calendar year, the PKR has shown a gain of 2.58 rupees, or 0.92 per cent.

    Friday’s trading session witnessed the PKR displaying strength as it appreciated by over 6 paisa. The intraday high (bid) reached 279.9, while the low (ask) touched 279.6, showcasing the currency’s resilience in the face of market fluctuations.

    In the open market, exchange companies quoted buying rates at 278.89 and selling rates at 281, contributing to the overall positive sentiment surrounding the PKR.

    Comparatively, against major currencies, the PKR experienced a marginal loss of 26.91 paisa against the Euro, closing at 300.87.

    Meanwhile, the British Pound became more affordable by 20.31 paisa, closing at 352.33. The Swiss Franc saw a decline of 1.59 rupees, closing at 318.89, and against the Japanese Yen, the PKR gained 1.71 paisa, closing at 1.8695.

    In the global currency market, the Chinese Yuan lost 0.4 paisa, closing at 38.82, while the Saudi Riyal closed at 74.47, experiencing a marginal loss of 1.43 paisa. The U.A.E. dirham also saw a decrease in value of 1.57 paisa, settling at 76.05.

    Shifting focus to the money market, the benchmark 6-month Karachi Interbank bid and offer rates experienced a 9 basis point increase, reaching 21.05 per cent and 21.3 per cent, respectively.

    This upward movement in yields follows the State Bank of Pakistan (SBP) maintaining the policy rate at 22 per cent for the fifth consecutive meeting, contributing to the evolving financial landscape.

  • Gold price in Pakistan registers Rs2,200 per tola single-day surge

    Gold price in Pakistan registers Rs2,200 per tola single-day surge

    On Thursday, the price of gold in Pakistan once again saw an upward trend, mirroring the global surge in rates. 

    The valued yellow metal reached Rs222,800 per tola in the domestic market, marking a noteworthy single-day gain of Rs2,200. 

    The 10-gramme gold, as reported by the All Pakistan Gems and Jewellers Sarafa Association (APGJSA), was traded at Rs191,015 following an increase of Rs1,886.

    This escalation follows a Rs1,000 per tola rise in gold prices in Pakistan on the preceding Wednesday. 

    Internationally, gold prices experienced a $20 increment, reaching $2,105 per ounce (with a premium of $20), as highlighted by APGJSA. 

    Concurrently, silver rates remained constant at Rs2,680 per tola in the local market.

  • PKR records eighth consecutive gain, closes at Rs282.79 vs dollar

    PKR records eighth consecutive gain, closes at Rs282.79 vs dollar

    In a notable financial trend, the Pakistani rupee (PKR) sustained its positive trajectory against the US dollar (USD) for the eighth consecutive session, witnessing a 0.04 per cent appreciation in the interbank market on Thursday.

    According to the State Bank of Pakistan (SBP), the rupee concluded at Rs282.79 after experiencing a rise of Re0.11.

    The preceding day saw a slight uptick in the PKR’s value, settling at Rs282.9 against the US dollar. 

    A significant development unfolded as the government successfully secured a historic amount of Rs397 billion ($1.4 billion) in Wednesday’s local currency bond auction. 

    This achievement surpassed expectations, marking the highest borrowing in years within a single auction, showcasing sustained market interest even as December draws to a close.

    The substantial participation of investors underscores their confidence in long-term bonds, fueled by the anticipation of an early 2024 rate cut. 

    The government strategically opted for long-term borrowing in response, effectively mitigating rollover risks and minimisingreliance on short-term funding in the future.

    On the global front, the US dollar regained strength on Thursday, prompted by a sudden end to a robust rally for US stocks, compelling investors to seek safety. 

    In the final hour of equities trade on Wall Street, heavy selling induced a ripple of risk aversion through markets, lifting the previously under-pressure greenback from lows.

    As of early Asia trade on Thursday, the dollar index, which is down 1 per cent for the year so far, remained steady at 102.37. 

    In a comparison with major currencies, the Pakistani currency strengthened by 69.15 paisa against the Euro, concluding at Rs309.57 as opposed to the previous rate of Rs310.26. 

    The British Pound saw a reduction in value of 79.58 paisa, settling at Rs357.41 in comparison to the previous day’s Rs358.21.

    However, PKR experienced a slight decline of 0.38 paisa against the Japanese yen, closing at Rs1.974 as compared to the previous day’s rate of Rs1.97. 

    The Saudi Riyal concluded at Rs75.38, registering a decrease of 1.15 paisa from its value of Rs75.39 a day ago. 

    Similarly, the UAE Dirham witnessed a decrease in value of 2.81 paisa, shifting from Rs77.027 the previous day to Rs76.999.

    Meanwhile, oil prices, a crucial indicator of currency parity, experienced a decline on Thursday due to concerns over low demand following an unexpected US crude inventory build, outweighing apprehensions about global trade disruptions linked to tensions in the Middle East. 

    Brent crude futures dropped by 3 cents to $79.67 a barrel, while US West Texas Intermediate crude stood at $74.16 a barrel, reflecting a 6-cent decrease.

  • SBP data reveals 23.5% YoY decline in auto loans

    SBP data reveals 23.5% YoY decline in auto loans

    In October, auto loans faced a decline for the 16th consecutive month due to high interest rates and inflation, as per data released by the State Bank of Pakistan (SBP).

    According to the SBP, auto loans witnessed a year-on-year drop of 23.5 per cent, amounting to Rs264 billion, and a month-on-month decrease of 3 per cent, down from Rs272 billion in September.

    While auto loans had peaked at Rs368 billion in June 2022, a subsequent decrease of Rs104 billion, or 28 per cent, occurred. This decline followed the SBP’s implementation of tighter monetary policies to address inflation and external imbalances.

    Financial analysts attribute this trend to the SBP’s measures, including elevated interest rates and the rupee’s significant depreciation against the dollar.

    These factors have led to increased costs in car financing and higher car prices, rendering them unaffordable for many consumers. The surge in inflation has further diminished consumer purchasing power.

    An analyst stated, “The auto sector bears the brunt of high interest rates and currency devaluation, rendering car financing and prices prohibitively expensive.”

    Despite recent price reductions by some car manufacturers, the anticipated boost in demand has not materialized. Consumers continue to grapple with high inflation and limited disposable income.

    Data from the Pakistan Automotive Manufacturers Association (PAMA) reveals a 44 per cent decline in car sales, totaling 27,163 units in the first four months of the current fiscal year, commencing in July.

    The SBP has aggressively increased its policy rate by a cumulative 15 percentage points to 22 per cent since September 2021, marking one of the world’s highest rates.

    Speculation suggests that the SBP will initiate a monetary policy easing in the first half of 2024, anticipating a relief in inflationary pressures and an improvement in foreign inflows to enhance the country’s external position.

    SBP data indicates a 0.8 per cent decrease in bank loans to the private sector, amounting to Rs8.10 trillion in October.

    Consumer loans, including an 8 per cent drop to Rs829 billion, witnessed personal loans declining by 4 per cent to Rs246 billion and housing loans falling by 2.7 per cent to Rs207 billion.

    Analysts predict an upswing in credit to the private sector in the coming months, as decreasing interest rates, fiscal consolidation, reducing crowding out, and improved foreign inflows are expected to alleviate liquidity constraints.

  • High interest rates and taxes lead to 20.90% drop in car financing in Pakistan

    High interest rates and taxes lead to 20.90% drop in car financing in Pakistan

    In a notable shift, the landscape of automobile financing in Pakistan has undergone a substantial transformation, with figures from the State Bank of Pakistan (SBP) indicating a significant decline. The data, released by SBP, unveils a marked decrease in car financing, plummeting to Rs285.19 billion in July 2023. This represents a notable 20.90 per cent year-on-year (YoY) decrease and a 2.91 per cent month-on-month (MoM) decrease when compared to the figures from July 2022, which stood at Rs360.55 billion, and June 2023, which registered at Rs293.73 billion.

    The primary contributors to this downward trajectory are multi-faceted. Firstly, the imposition of higher interest rates has played a pivotal role in reshaping the car financing landscape. Additionally, the surge in car prices has also contributed significantly to this downturn. Moreover, regulatory restrictions governing the acquisition of loans have created a notable barrier, further impacting the market. Furthermore, the imposition of elevated taxes on the import of automobiles and their integral parts has compounded the challenges faced by the automobile financing sector.

    Contrastingly, in a separate but related sphere, consumer financing for house building displayed a contrasting narrative. SBP’s data reveals that by the conclusion of July 2023, consumer financing for house building registered at Rs211.11 billion, marking a commendable 4.82 per cent YoY increase. According to Mettis Global, this uptick can largely be attributed to SBP’s proactive measures to stimulate the housing and construction sector within the nation. However, in terms of monthly changes, the figures remained relatively static, with a minor decline of 0.57 per cent.

    Meanwhile, financing for personal use, amounting to Rs250.24 billion, experienced a marginal 0.09 per cent YoY decrease. Similarly, on a monthly basis, financing within this category saw a slight downturn of 0.95 per cent. Consequently, the cumulative credit extended to consumers in various segments reached Rs851.22 billion during the assessment month. This overall credit value reflected a notable 4.70 per cent YoY decline and a 0.99 per cent MoM reduction.

    Furthermore, the credit scenario within the private sector depicted a nuanced picture. Outstanding credit to the private sector encountered a minor 0.06 per cent YoY decrease and a slightly more pronounced 1.12 per cent MoM reduction, resting at Rs8.19 trillion in July 2023. In contrast, loans granted to the manufacturing sector exhibited an encouraging 1.12 per cent YoY increase, amounting to Rs4.48 trillion during the review period. However, on a monthly scale, the loans within the manufacturing sector dipped by 1.44 per cent MoM.

    In summation, the marked decline in car financing, as evidenced by SBP’s recent data, underscores the multifaceted challenges that the automobile financing sector in Pakistan is currently grappling with. While interest rates, car prices, and regulatory curbs have contributed to this downward trend, other sectors such as house building and manufacturing loans have demonstrated distinct trajectories. As the nation navigates through these financial dynamics, stakeholders remain vigilant in monitoring and adapting to these evolving circumstances.

  • Remittances to Pakistan decline by 19.3% to $2 billion in first month of fiscal year

    Remittances to Pakistan decline by 19.3% to $2 billion in first month of fiscal year

    Pakistan has experienced a notable decline in remittances during the first month of the current fiscal year, as data released by the central bank reveals a year-on-year drop of 19.3 per cent, amounting to $2 billion. This concerning trend was further accentuated by a month-on-month reduction of 7.3 per cent.

    In the month of July, remittance inflows from Pakistanis residing abroad amounted to $2.2 billion. The distribution of these remittances showed that Saudi Arabia held the top spot with a contribution of $486.7 million, followed by the United Arab Emirates with $315.1 million. The United Kingdom and the United States of America followed closely with $305.7 million and $238.1 million, respectively.

    Economic analysts anticipated this decline in remittances for the month of July, given the post-Eid ul Adha period. The reduction was expected, as Pakistani expatriates tend to increase their cash transfers back home during festive seasons. Interestingly, it seems that some of these remittance inflows have been diverted to the grey market due to more favourable exchange rates for dollars.

    Samiullah Tariq, the head of research at Pak-Kuwait Investment Company, shed light on this shift: “In my view, as this was the month after Eid ul Adha, flows were relatively subdued. Some Pakistanis are opting for unofficial channels to transfer money.” The continuous devaluation of the Pakistani currency is also impacting investment sentiment among overseas Pakistanis, discouraging them from contributing more significantly to the economy.

    The recent release of these remittance statistics coincides with the International Monetary Fund’s (IMF) approval of a $3 billion bailout package for Pakistan. The nation’s economy had been teetering on the edge of default due to mounting debt obligations. Governor Jameel Ahmad of the State Bank of Pakistan (SBP) reassured that the SBP remains committed to upholding its obligations, including maintaining a controlled difference between the interbank and open market exchange rates, as specified in the agreement with the IMF.

    Fahad Rauf, the head of research at Ismail Iqbal Securities, voiced his concern over the decline in remittances: “The extent to which remittances have declined is indeed worrying. Unofficial channels offering higher rates have played a role in this scenario.” He also highlighted the SBP’s efforts to attract more remittances through proposed changes in incentive schemes, including a 50 per cent increase in the reimbursement rate for Saudi Riyal conversions.

    The SBP’s latest monetary policy statement forecasts the current account deficit for fiscal year 2024 to range between 0.5 per cent and 1.5 per cent of the gross domestic product. This projection takes into account both evolving domestic and global economic conditions. The SBP remains optimistic about the prospects of multilateral and bilateral inflows following the IMF’s stand-by arrangement, which is expected to bolster external buffers and address short-term external financing requirements.

    As the nation navigates through these challenges, the market-determined exchange rate will continue to play a pivotal role as the first line of defence against external shocks, further supporting the buildup of reserves. With a cautious eye on global commodity prices and a moderate domestic economic recovery, Pakistan aims to manage its imports and strengthen its economic stability.