Tag: SBP

  • Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    Pakistan’s foreign exchange reserves dip to $3.91 billion amid IMF agreement delay

    In a challenging turn of events for Pakistan’s economy, the foreign exchange reserves held by the State Bank of Pakistan (SBP) have plummeted to $3.91 billion.

    The decline in reserves is primarily attributed to external debt payments, coinciding with the expiration of the country’s International Monetary Fund (IMF) program, which has been stalled for several months.

    The SBP announced on Thursday that the reserves decreased by $179 million during the week ending on June 2, leaving the country with barely enough coverage for controlled imports for just one month.

    Commercial banks, on the other hand, are holding net foreign reserves worth $5.42 billion, $1.51 billion more than the central bank. Consequently, Pakistan’s total foreign reserves stand at $9.3 billion as of June 2.

    This marks the sixth consecutive weekly drop in foreign exchange reserves for Pakistan, signaling a lack of progress in securing external financing. Political instability has played a significant role in the deteriorating economy, and the country has yet to secure much-needed funding to avert the risk of default.

    Pakistan’s $350 billion economy is currently in turmoil due to financial woes and the delay in reaching an agreement with the IMF. The pending agreement would release crucial funds that are essential for stabilizing the economy.

    The government has been engaged in discussions with the IMF since the end of January to resume a $1.1 billion loan tranche, which has been on hold since November 2022. This loan is part of a larger $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019.

    Earlier today, Finance Minister Ishaq Dar revealed that the coalition government has shared its budget numbers with the IMF, aiming to unlock the ninth review.

    He expressed confidence that there are “no issues in the numbers.” Pakistan’s government faces significant pressure from the IMF to implement stringent fiscal measures and unlock the final tranche of a vital bailout package.

    To meet the IMF’s requirements, Pakistan must eliminate subsidies in sectors such as energy, allow the rupee to float against the US dollar, increase taxes and duties, and impose import restrictions. These measures are seen as crucial steps toward stabilising the economy and securing external funding.

    The future of Pakistan’s economy hinges on successful negotiations with the IMF and the implementation of effective economic reforms.

    The government must address political instability and work towards regaining the confidence of international lenders to alleviate the financial strains on the country.

  • Pakistan’s forex reserves decline to $4.31 billion, covering less than a month’s worth of imports

    Pakistan’s forex reserves decline to $4.31 billion, covering less than a month’s worth of imports

    The State Bank of Pakistan (SBP) has experienced a continuous decline in foreign exchange reserves for the third consecutive week. This decline is attributed to the country’s ongoing struggle to secure a deal with the International Monetary Fund (IMF).

    The central bank’s statement indicates that the reserves decreased by $72 million to reach $4.31 billion as of May 12, primarily due to external debt payments. This amount is sufficient for less than a month’s worth of imports.

    In contrast, commercial banks in Pakistan hold net foreign reserves amounting to $5.62 billion, which is $1.01 billion higher than the central bank’s reserves. Therefore, the country’s total liquid foreign reserves amount to $9.93 billion.

    Pakistan’s economy is currently facing significant challenges, exacerbated by financial difficulties and the delay in reaching an agreement with the IMF. Such an agreement is crucial as it would provide much-needed funding to mitigate the risk of default.

    Earlier, on May 11, the State Bank of Pakistan (SBP) witnessed a decline of $74 million in foreign exchange reserves within a week, resulting in reserves amounting to $4.38 billion. Additionally, commercial banks held net foreign reserves of $5.6 billion.

    Reports indicate that the IMF remains skeptical and is urging Islamabad to take further actions to unlock the loan program, despite assurances from friendly countries regarding external funds for Pakistan.

    Pakistan has been asked to present a repayment plan for a $3.7 billion loan to the IMF in June and demonstrate stronger support from friendly nations to fulfill its commitments.

  • Inflation worsens in Pakistan, affecting purchasing power of millions

    Inflation worsens in Pakistan, affecting purchasing power of millions

    The citizens of Pakistan, a poor country with a population of 220 million, have been struggling with record-high inflation due to the government’s inability to control prices. According to the weekly bulletin released by the Pakistan Bureau of Statistics (PBS), the weekly inflation increased by 46.82 per cent year-on-year and 0.15 per cent week-on-week, ending on April 27.

    The rise in the sensitive price indicator (SPI) was attributed to the increase in the prices of potatoes, chicken, wheat flour, gur, bread, and rice irri-6/9. On the other hand, there was a decrease in the prices of tomatoes, bananas, onions, sugar, LPG, pulse masoor, and mustard oil during the same period. The SPI for the week under review was recorded at 252.20 points, up from 251.83 points the previous week and 171.78 points recorded during the week ended on April 28, 2022.

    Fahad Rauf, head of research at Ismail Iqbal Securities, attributed the moderate increase in SPI mainly to the rise in the prices of potatoes and mutton. The price trend of perishable food items during the Eid week has been mixed, with the prices of some items going up and some going down. Ismail Iqbal Securities predicted that the CPI for April 2023 would come around 38 per cent, up from 35.4 per cent in March 2023, due to house rent revisions and higher wheat prices.

    The absence of the International Monetary Fund (IMF) programme and persistent inflationary pressures may result in another rate hike, as per Ismail Iqbal Securities. An interest rate hike could further discourage businesses, which have already postponed their expansion plans and hiring. Import restrictions have also added to the woes of industries and businesses that have faced frequent shutdowns, resulting in uncertain or no wages for millions of workers.

    The SPI is compiled by PBS by collecting prices of 51 essential items from 50 markets in 17 cities of the country. During the week, prices of 21 items increased by 41 per cent, while prices of seven items decreased by 13.73 per cent, and prices of 23 items remained unchanged, accounting for 45.10 per cent of the total. Various weightages are assigned to different commodities in the SPI basket, with milk, electricity, wheat flour, sugar, firewood, long cloth, and vegetable ghee having the highest weights for the lowest quintile. The price of milk and wheat flour increased, while the price of sugar decreased. The prices of electricity, firewood, long cloth, and vegetable ghee remained unchanged. However, the prices of all these commodities increased on a yearly basis.

  • Pakistan’s economic stability remains fragile despite increase in forex reserves

    Pakistan’s economic stability remains fragile despite increase in forex reserves

    As the country tries to find ways to secure external financing and keep itself afloat, the State Bank of Pakistan (SBP)-held foreign exchange reserves recorded a meagre rise. The SBP, in its weekly bulletin, mentioned its reserves have jumped by $30 million to $4.46 billion as of April 20, which will provide an import cover of less than a month — a position that has been the same for several months now.

    The net foreign reserves held by commercial banks stand at $5.56 billion, $1.1 billion more than the SBP, taking the total liquid foreign reserves to $10.02 billion. Although the central bank did not specify the reason behind the increase, there was a $300 million rise in the reserves last week — which was due to the loan provided by the Industrial and Commercial Bank of China.

    The $350 billion economy is in turmoil amid financial woes and the delay in an agreement with the International Monetary Fund (IMF) that would release much-needed funding crucial to avoid the risk of default.

    The government has been in talks with the Washington-based lender since end-January to resume the $1.1 billion loan tranche that has been on hold since November, part of a $6.5 billion Extended Fund Facility (EFF) agreed upon in 2019. A deal with the IMF will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves.

    Finance Minister Ishaq Dar said earlier this week that Pakistan has “fulfilled all the conditions” of the IMF and hoped that the Fund would soon sign the staff-level agreement. Speaking to Geo News, Dar said both Saudi Arabia and the United Arab Emirates (UAE) have informed the IMF about their commitments to provide $3 billion to Pakistan.

    Riyadh will provide $2 billion while Abu Dhabi has promised $1 billion to Pakistan, Dar said, adding that the Washington-based lender has also been informed in this regard.

    The finance minister said all the conditions for the staff-level agreement between Pakistan and IMF have been fulfilled. “Pakistan is hopeful that IMF will soon sign the SLA and get it approved by its Executive Board,” Ishaq Dar added.

  • Pakistan records 17% increase in exports to Afghanistan, SBP data shows

    Pakistan records 17% increase in exports to Afghanistan, SBP data shows

    According to a report by the State Bank of Pakistan (SBP), Pakistan’s export of goods and services to Afghanistan has increased by 17.02 per cent during the first eight months of the current fiscal year (2022-23) compared to the corresponding period of the previous year.

    From July-February (2022-23), overall exports to Afghanistan reached US $346.522 million, while during the same period last year, exports were recorded at US $296.109 million, showing a growth of 17.02 per cent.

    Furthermore, the year-to-year basis also showed an increase of 60.49 per cent in exports to Afghanistan, rising from US $38.222 million in February 2022 to US $61.345 million in February 2023. Meanwhile, on a month-on-month basis, exports to Afghanistan also rose by 82.58 per cent during February 2023, reaching US $61.345 million, compared to US $33.598 million in January 2022.

    In contrast, Pakistan’s exports to other countries decreased by 9.65 per cent during the eight months, dropping from US $20.632 billion to US $18.639 billion, according to SBP data.

    The imports from Afghanistan into Pakistan during the period under review were recorded at US $13.540 million, which was a significant decrease of 88.65 per cent compared to last year’s US $119.328 million in July-February (2021-22).

    Year-on-year, imports from Afghanistan also dropped by 98.89 per cent, from US $13.723 million in February 2022 to US $0.151 million in February 2023. However, on a month-on-month basis, imports from Afghanistan increased by 11.02 per cent during February 2023, reaching US $0.136 million, compared to US $0.122 million in January 2022.

    Overall, the imports into Pakistan also witnessed a decrease of 21.02 per cent, from US $47.336 billion to US $37.388 billion, according to SBP data. Based on the trade figures, the trade of goods and services with Afghanistan witnessed an 88.35 per cent increase in surplus during the period under review compared to the previous year, with a recorded surplus of US $332.982 million against US $176.781 million during the last year.

  • SBP expected to increase interest rates again on IMF insistence

    SBP expected to increase interest rates again on IMF insistence

    The State Bank of Pakistan (SBP) is reportedly considering increasing the interest rate by 2 per cent during the upcoming Monetary Policy Committee (MPC) meeting in a bid to unlock the International Monetary Fund (IMF) programme.

    This follows failed negotiations between the Shehbaz Sharif-led government and the IMF, with the latter demanding that Pakistan raise the interest rate by 4 per cent due to its belief that inflation is lower in Pakistan as per the interest rate.

    The SBP had already increased the interest rate by 2 per cent, but now the IMF is reportedly pressuring Islamabad to raise it again by 2 per cent. The MPC is scheduled to meet on April 4 to review the interest rate as per the IMF’s demand.

    According to The News, the SBP has reportedly agreed to raise the interest rate by 2 per cent in accordance with the Fund’s demands. On March 2, the SBP raised the monetary policy rate by 300 basis points to 20 per cent due to a deterioration in inflation outlook and expectations amid recent external and fiscal adjustments.

  • SBP jacks up policy rate by 300 bps to 20%

    SBP jacks up policy rate by 300 bps to 20%

    In a meeting held today, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) increased the policy rate by 300 basis points (bps) to 20 per cent as a measure to curb inflationary pressure.

    The meeting’s result matched the market’s predictions, with analysts expecting the State Bank of Pakistan’s Monetary Policy Committee to implement a significant hike of 200-300 basis points.

    During today’s meeting, the MPC acknowledged that recent fiscal adjustments and depreciation of the exchange rate have resulted in a significant deterioration of the near-term inflation outlook. This has also led to an increase in inflation expectations, as indicated by the latest survey results.

    The committee anticipates that inflation will continue to rise in the coming months due to the impact of these adjustments, before gradually decreasing. The projected average inflation rate for this year is now estimated to be between 27 per cent to 29 per cent, compared to the November 2022 projection of 21 per cent to 23 per cent. Given this context, the MPC stressed the importance of stabilizing inflation expectations and implementing strong policy measures.

    On the external front, the MPC acknowledged that while there has been a substantial reduction in the current account deficit (CAD), there are still some vulnerabilities present. In January 2023, the CAD decreased to $242 million, the lowest level since March 2021.