Tag: MPC

  • Pakistan will pay back $1 billion international bond 3 days before its due date: SBP governor

    Pakistan will pay back $1 billion international bond 3 days before its due date: SBP governor

    State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Friday that Pakistan will pay back a $1 billion international Sukuk bond three days before its due date of December 5, 2022.

    Given that Pakistan is recovering from terrible floods that claimed more than 1,700 lives and experiencing an economic crisis, there has been rising concern about its capacity to satisfy its obligations for external finance.

    SBP Governor stated during a briefing that the bond repayment, which expires on December 5, totals $1.08 billion.

    In order to guarantee that the repayment would not have an impact on foreign exchange reserves, Jameel noted that finance had been arranged from both international and bilateral sources. Next week on Tuesday, the Asian Infrastructure Investment Bank was anticipated to make an immediate infusion of $500 million, he added.

    As of November 18, Pakistan’s reserves at the central bank were just $7.8 billion, which is not enough to pay for a month’s worth of imports.

    However, Jameel stressed that he was optimistic the reserve number will be “far higher” by the end of the financial year in June 2023. Reserve levels will rely on the continuous realisation of anticipated inflows and the rollover of loans from friendly nations.

    He stated at the briefing that he anticipates that the inflows from foreign lenders would allow him to meet his external finance needs on schedule. Despite payments of $1.8 billion in November, he emphasised that reserves were steady.

    The early completion of Pakistan’s flood recovery plan, according to the International Monetary Fund (IMF), is crucial for negotiations and ongoing financial assistance from multilateral and bilateral partners.

    Pakistan is now enrolled in an IMF bailout programme, which it joined in 2019. Despite the fact that Pakistan is fighting a full-blown economic crisis with decades-high inflation and limited reserves, a fixed date for the ninth review to release much-needed cash is still pending.

  • SBP raises policy rate to 14-year-high of 15 per cent

    SBP raises policy rate to 14-year-high of 15 per cent

    In an attempt to calm the economy, control inflation, and support the beleaguered rupee, the State Bank of Pakistan’s Monetary Policy Committee (MPC) decided to raise the policy rate by 125 basis points (bps) to 15 per cent on Thursday.

    The previous policy rate at the same level was in 2008, so the current policy rate is at a level that is 14 years higher. The committee also disclosed that, in order to improve the transmission of monetary policy, interest rates on EFS and LTFF loans are now tied to the policy rate.

    Following the MPC meeting on Thursday, SBP Acting Governor Dr Murtaza Syed gave a virtual press conference where he announced the monetary policy decision. He told the media that the rate of inflation has been rising at its highest rate since 1970.

    “Globally, inflation is at multi-decade highs in most countries, and central banks are acting aggressively, putting pressure on most emerging market currencies to depreciate,” he continued.

    He praised recent government decisions, such as ending petroleum subsidies, and claimed that these actions had made it possible to finish the IMF loan programme. Pakistan’s external financing requirements for FY23 will be met thanks to significant additional funding from external sources, which will be stimulated by the anticipated conclusion of the ongoing IMF review.

    Then, during the course of FY23, rupee pressures should ease and the SBP’s FX reserves should gradually resume their prior upward trajectory.

    According to him, monetary tightening and fiscal consolidation will cause GDP growth to moderate to 3–4 per cent in FY23, helping to close the positive output gap and lessen demand-side pressures on inflation.

    The acting governor SBP stated that, according to the MPC’s baseline outlook, headline inflation is likely to remain high in FY23, hovering around 19–20 per cent, before dropping sharply to the target range of 5–7 per cent by the end of FY24, driven by stringent policies, a normalisation of global commodity prices, and advantageous base effects.