Tag: pakistan economy

  • Pakistan’s weekly inflation dips slightly amid lower fuel and onion prices

    Pakistan’s weekly inflation dips slightly amid lower fuel and onion prices

    Pakistan’s weekly inflation, as measured by the Sensitive Price Indicator (SPI), registered a slight decline of 0.16 per cent for the combined consumption groups during the week ending on August 15, according to the Pakistan Bureau of Statistics (PBS).

    The SPI for the period under review stood at 322.03 points, down from 322.54 points the previous week. However, compared to the corresponding week last year, the SPI for the combined consumption group saw a significant increase of 16.86 per cent.

    The SPI, with the base year set at 2015-16, covers 17 urban centres and tracks 51 essential items across all expenditure groups.

    For the lowest consumption group, with a monthly expenditure of up to Rs17,732, the SPI witnessed a marginal increase of 0.07 per cent, rising to 311.04 points from 310.83 points in the previous week.

    Similarly, the SPI for the Rs 17,732-22,888 consumption group saw a minimal rise of 0.01 per cent. In contrast, for consumption groups with expenditures ranging from Rs22,889-29,517, Rs29,518-44,175, and above Rs44,175, the SPI declined by 0.05 per cent, 0.10 per cent, and 0.25 per cent, respectively.

    Out of the 51 items monitored during the week, the prices of 19 items (37.25 per cent) increased, 13 items (25.50 per cent) decreased, while the remaining 19 items (37.25 per cent) remained stable.

    The key items that saw a decrease in average prices on a week-on-week basis included onions (4.91 per cent), petrol (3.15 per cent), diesel (2.44 per cent), wheat flour (1.83 per cent), pulse moong (1.81 per cent), chicken (1.57 per cent), bananas (1.36 per cent), LPG (0.90 per cent), sugar (0.59 per cent), potatoes (0.58 per cent), and pulse masoor (0.56 per cent).

    Conversely, items that recorded an increase in their average prices included tomatoes (34.77 per cent), eggs (4.78 per cent), garlic (1.99 per cent), beef (0.88 per cent), cooked beef (0.41 per cent), georgette (0.40 per cent), gur (0.39 per cent), curd (0.32 per cent), and mustard oil (0.28 per cent).

  • Inflation has eroded purchasing power of Pakistanis: Bloomberg

    Inflation has eroded purchasing power of Pakistanis: Bloomberg

    A recent Bloomberg report reveals that Pakistan is facing the highest inflation rate in its region.

    The report explains that the Pakistani government has had to raise energy prices significantly to secure a new programme from the International Monetary Fund (IMF).

    Although inflation has decreased somewhat, electricity bills have risen sharply, now often surpassing household rent. This increase in power tariffs, aimed at meeting IMF conditions and implementing required reforms, has led to widespread protests across the country.

    Bloomberg’s report shows that since 2021, electricity prices in Pakistan have soared by 155 per cent. This surge followed the government’s decision to raise both industrial and retail electricity rates to improve the chances of obtaining IMF loans.

    The rising energy costs have worsened the country’s economic crisis, with inflation around 12 per cent—the highest in Asia—reducing people’s purchasing power and leading to a drop in electricity usage as individuals and businesses turn to solar power.

    In July, following the approval of a $7 billion IMF loan, the average residential electricity price increased by 18 per cent. Many residents now find their electricity bills exceeding their monthly rent, which ranges from $100 to $700, according to Samiullah Tariq, head of research at Pakistan Kuwait Investment Co.

    In response to growing public frustration, Prime Minister Shehbaz Sharif has announced a Rs50 billion ($180 million) subsidy over the next three months to help low-income households cope with the higher energy costs.

    The IMF programme is focused on improving Pakistan’s energy sector through cost reductions and the privatisation of state-owned power companies. The power regulator estimates that Pakistan loses about 16 per cent of its electricity due to theft and inefficiencies in its transmission and distribution systems.

    The Bloomberg report underscores the severity of Pakistan’s economic challenges and the urgent need for effective solutions in its energy sector.

  • SBP governor says debt rollovers will ease Pakistan’s FY25 financial burden

    SBP governor says debt rollovers will ease Pakistan’s FY25 financial burden

    State Bank of Pakistan (SBP) Governor Jameel Ahmad assured the public on Wednesday that friendly nations will roll over nearly $16 billion of the country’s outstanding debt for the fiscal year 2025.

    This crucial support is expected to provide the government with significant breathing room amid ongoing financial challenges.

    In his testimony before the National Assembly Standing Committee on Finance and Revenue, chaired by MNA Naveed Qamar, Ahmad revealed that Pakistan’s total debt obligations for FY25 amount to $26.2 billion. Following the planned rollovers, the remaining debt to be settled by June next year will be reduced to $10 billion.

    Ahmad also highlighted that the central bank has already repaid $1.5 billion in debt last month, leaving an outstanding amount of $8.5 billion for the rest of the fiscal year.

    Secretary of Finance Imdad Ullah Bosal added that Pakistan is set to receive its first tranche from the International Monetary Fund (IMF) following the rollover of approximately $4 billion in Chinese commercial loans. Additionally, $4.4 billion is expected from the Asian Development Bank and the World Bank.

    The SBP Governor further stated that there is no immediate pressure on external payments, which should contribute to the stability of the Pakistani rupee. He projected that foreign exchange reserves could reach $13 billion by the end of the fiscal year.

    With improved economic conditions, further reductions in the policy rate are anticipated. However, he warned that inflation might rise to 13.5 per cent this fiscal year due to budgetary policies and energy price fluctuations.

    In his presentation, Ahmad outlined a comprehensive five-year plan to the Finance Committee. The plan focuses on restoring price stability, managing the current account deficit, ensuring that foreign exchange reserves cover three months of import needs, and achieving greater financial stability and transparency.

    He noted that GDP growth has been constrained to 3.5 per cent over the past decade and emphasised the need to boost exports by 10 to 15 per cent. Ahmad also assured that there are no restrictions on imports, aiming to foster a more balanced economic growth.

  • Pakistan’s fiscal deficit falls to 6.8% of GDP in FY24

    Pakistan’s fiscal deficit falls to 6.8% of GDP in FY24

    In the fiscal year 2023-2024, Pakistan’s fiscal deficit decreased to 6.8 per cent of GDP, down from 7.7 per cent the previous year, according to data from the Finance Ministry.

    In nominal terms, however, the fiscal deficit expanded to Rs7.21 trillion, up from Rs6.52 trillion the year before. Despite this, the country achieved a primary surplus of Rs952.92 billion, equivalent to 0.9 per cent of GDP, in contrast to a primary deficit of Rs825.53 billion, or 1.0 per cent of GDP, in FY23.

    To address the fiscal deficit, the government secured Rs6.89 trillion through domestic borrowing and an additional Rs320.7 billion through external loans. This compares to the previous year when the entire deficit was covered by Rs7.2 trillion in domestic borrowing, and Rs679.85 billion in external loans were repaid.

    On the revenue side, the government collected Rs13.27 trillion (12.5 per cent of GDP) in FY24, up from Rs9.63 trillion (11.4 per cent of GDP) in FY23. Tax revenue constituted approximately Rs10.1 trillion (9.5 per cent of total revenue), while non-tax revenue amounted to Rs3.18 trillion.

    Government expenditure totalled Rs20.48 trillion (19.3 per cent of GDP) in FY24, an increase from Rs16.15 trillion (19.1 per cent of GDP) the previous year.

    Nearly 90.7 per cent of this expenditure, or Rs18.57 trillion, was allocated to current expenditures, which included mark-up payments (Rs8.16 trillion), defence (Rs1.86 trillion), and pensions (Rs807.8 billion).

  • JPMorgan warns of temporary PKR depreciation despite strong economic conditions

    JPMorgan warns of temporary PKR depreciation despite strong economic conditions

    Despite a robust Balance of Payments (BoP) position, Pakistan may experience a depreciation of the Pakistani rupee (PKR) in the near term due to the finalisation of outstanding dividend payments, according to a recent report from JPMorgan analysts.

    The report suggests that while the PKR is not perceived as overly expensive, analysts are anticipating more favourable foreign exchange (FX) entry points.

    They also noted that although the International Monetary Fund (IMF) has declared the removal of all FX restrictions, there could still be informal barriers affecting the repatriation of dividends.

    Should these informal restrictions be fully addressed at the commencement of the Extended Fund Facility (EFF), it might lead to a moderate increase in the USD/PKR exchange rate over the coming months. However, analysts expect any such increase to be short-lived due to positive BoP conditions.

    The current environment is seen as a promising opportunity for bullish trades in T-bills and bonds, especially with the anticipated large-scale interest rate cuts by the State Bank of Pakistan (SBP).

    Since the beginning of the year, the PKR’s Nominal Effective Exchange Rate (NEER) has strengthened, reflecting improvements in the BoP, such as higher export revenues, stable remittance flows, and a gradual return of financial inflows.

    Although some concerns persist over foreign currency restrictions that might have artificially dampened FX volatility, the IMF’s latest report from May confirms the removal of remaining FX controls as of late January. This has resulted in a stable PKR with no significant premium in the informal or parallel market.

    Moreover, the import bill has increased only gradually, indicating limited pent-up demand. While the Real Effective Exchange Rate (REER) shows signs of potential overvaluation, it remains far from historical extremes and is expected to adjust downwards as inflation moderates.

    Overall, JPMorgan believes that any negative FX adjustments are likely to be minor, provided there is no significant worsening of the current account balance.

  • SBP expected to lower interest rates on Monday as inflation stabilises

    SBP expected to lower interest rates on Monday as inflation stabilises

    The State Bank of Pakistan (SBP) is anticipated to reduce its key interest rate once more during its upcoming policy meeting on Monday.

    This will be the first meeting following the recent staff-level agreement with the International Monetary Fund (IMF) and the announcement of a new state budget, according to analysts.

    Earlier this month, Pakistan and the IMF reached an agreement on a 37-month loan programme. The deal has introduced stringent measures, including increased taxes on agricultural incomes and higher electricity prices, which have sparked concerns among lower and middle-income citizens already struggling with inflation and the potential for increased taxes.

    In June, the SBP lowered its key interest rate by 150 basis points, reducing it from a historic high of 22 per cent. This marked the central bank’s first rate cut in nearly four years, aimed at stimulating economic growth amid a significant decrease in retail inflation. Inflation had dropped to 12.6 per cent in June, down from 38 per cent in May 2023.

    Out of 14 analysts surveyed, only one predicted that the SBP would maintain the current rate of 20.5 per cent. The majority forecast a rate cut, with seven analysts expecting a reduction of 100 basis points, five anticipating a 150 basis points cut, and one predicting a 200 basis points decrease.

    Mustafa Pasha, Chief Investment Officer at Lakson Investments, noted that the anticipated inflationary surge following the budget has not occurred. The central bank had previously cautioned about potential inflationary pressures from the budget, citing insufficient progress on structural reforms to expand the tax base.

    To compensate, the government set a demanding tax revenue target of Rs13 trillion ($47 billion) for the current fiscal year, representing a nearly 40 per cent increase from the previous year, and aims to reduce the fiscal deficit to 5.9 per cent of GDP from 7.4 per cent in the previous year to secure essential IMF funding.

    Pasha added that the clarity on the IMF programme, currency market stability, and steady foreign inflows into domestic debt and equities provide “ample comfort to the SBP to continue easing the policy rate in July and beyond.”

  • SBP-held forex reserves surge by $18.6 million to $9.42 billion

    SBP-held forex reserves surge by $18.6 million to $9.42 billion

    The latest figures from the State Bank of Pakistan (SBP) reveal a slight increase in the country’s foreign exchange reserves. During the week ending July 12, 2024, SBP’s reserves grew by $18.6 million, marking a 0.20 per cent rise to reach $9.42 billion.

    In parallel, Pakistan’s overall foreign reserves, including both SBP and commercial banks, increased by $58.8 million, or 0.40 per cent, totaling $14.7 billion.

    Commercial banks in Pakistan also saw a rise in their reserves, which grew by $40.2 million, or 0.77 per cent, reaching $5.28 billion.

    Since the start of the fiscal year, SBP’s reserves have grown by $34.2 million, reflecting a 0.36 per cent increase. Notably, in the current calendar year alone, reserves have surged by $1.2 billion, representing a notable 14.63 per cent rise.

    These developments signify positive momentum in Pakistan’s foreign exchange reserves, contributing to a more stable economic outlook for the nation.

  • IMF predicts modest 3.5% growth for Pakistan amid global economic uncertainty

    IMF predicts modest 3.5% growth for Pakistan amid global economic uncertainty

    The International Monetary Fund (IMF) has forecasted a 3.5 per cent growth rate for Pakistan’s economy in the fiscal year 2024-25 (FY25), slightly below the government’s target of 3.6 per cent.

    This comes after Pakistan’s economy grew by 2.4 per cent in the fiscal year 2023-24, missing the government’s target of 3.5 per cent.

    Pakistan’s economic challenges are compounded by chronic mismanagement, the aftermath of the COVID-19 pandemic, the war in Ukraine, inflationary pressures from supply chain disruptions, and severe flooding in 2022.

    The IMF’s World Economic Outlook (WEO) update warns of modest global growth over the next two years, influenced by cooling activity in the US, stabilization in Europe, and stronger consumption and exports from China, but significant risks remain.

    Globally, the IMF has maintained its 2024 growth forecast at 3.2 per cent and slightly increased its 2025 forecast to 3.3 per cent. IMF Managing Director Kristalina Georgieva has expressed concern over these tepid growth rates. The US growth forecast for 2024 has been revised down to 2.6 per cent, reflecting slower consumption, while the 2025 forecast remains at 1.9 per cent due to a cooling labor market and moderated spending.

    The IMF has raised China’s 2024 growth forecast to 5.0 per cent, reflecting a rebound in private consumption and strong exports, but recent data showing lower-than-expected GDP growth poses a downside risk.

    The IMF also highlighted persistent risks to inflation due to high services prices and wage growth in labor-intensive sectors, alongside potential trade and geopolitical tensions that could exacerbate price pressures. Additionally, the IMF warned of the impact of economic policy shifts from upcoming elections, which could lead to increased protectionism and fiscal irresponsibility.

    The IMF advised policymakers to restore price stability, gradually ease monetary policy, rebuild fiscal buffers, and implement policies to promote trade and productivity growth.

  • PM Shehbaz urges FBR to modernise tax system without burdening honest taxpayers

    PM Shehbaz urges FBR to modernise tax system without burdening honest taxpayers

    Prime Minister Muhammad Shehbaz Sharif has directed the Federal Board of Revenue (FBR) to implement a strategy using the latest technology to expand the tax base without imposing additional burdens on honest taxpayers.

    During his visit to the FBR Headquarters, the Prime Minister underscored the government’s commitment to steering Pakistan towards economic progress and stability.

    Prime Minister Sharif highlighted the necessity of collective and individual efforts, sincerity, and sacrifices to prioritise national interests over personal gains.

    He described the recent staff-level agreement with the International Monetary Fund (IMF) as a positive development for the country’s economy and expressed optimism that the IMF board would endorse it.

    He urged the FBR to work diligently to ensure this IMF programme is the last one needed, paving the way for a prosperous future.

    Sharif emphasised the importance of taxing those who evade payments to alleviate the repeated financial strain on honest taxpayers, including government employees. He advocated for leveraging modern technologies, such as artificial intelligence, to digitise FBR operations, which he viewed as crucial for broadening revenue sources without unfairly burdening compliant taxpayers.

    The Prime Minister criticised the reliance on foreign debts, stressing that sustainable nation-building requires self-reliance and effective tax collection. He insisted that current FBR reforms be conducted objectively and transparently, prioritising national interests. Sharif also instructed FBR Chairman Malik Amjad Zubair Tiwana to bring any departmental issues to light promptly.

    Acknowledging FBR’s success in collecting 30% more revenue compared to the previous year, Sharif insisted that tax enforcement should focus on achieving set targets without causing undue difficulties for compliant businesses and industrialists.

    He recalled the introduction of agricultural tax in Punjab 27 years ago, which was subsequently adopted by other provinces, highlighting the need to address general sales tax collection issues.

    Upon his arrival at FBR Headquarters, Sharif was welcomed by key government officials, including Finance Minister Muhammad Aurangzeb and Minister of State for Finance Ali Pervaiz Malik. The Prime Minister paid homage to the FBR’s fallen heroes by laying a wreath and offering Fateha. He reiterated that the automation and digitisation of FBR are government priorities and authorised the immediate release of Rs2 billion to enhance the Web-Based One Customs System (WeBOC).

    The meeting, attended by several ministers and senior officials, included a briefing on ongoing FBR reforms and the progress of the digitisation strategy.

    The Prime Minister was informed of the completion of the first phase of the FBR Tajir Dost Mobile application, which simplifies tax return processes. Additionally, the use of advanced technology has identified approximately 4.9 million potential taxpayers.

    Sharif instructed the FBR to expand the tax net to include these identified individuals and to address the legitimate demands of flour mill owners through direct engagement.