Business

Key takeaways from SBP’s off-cycle MPC meeting

Published

2 years ago

Farwa

In an off-cycle review, the State Bank of Pakistan (SBP) raised its key interest rate by 300 basis points on Thursday, exceeding investor expectations, as the cash-strapped country seeks to encourage the International Monetary Fund (IMF) to release critical financing.

The key rate of the SBP now stands at 20%, its highest level since October 1996, with consumer price inflation now at its highest level for almost 50 years.

The Monetary Policy Committee’s (MPC) next meeting is set to be held on April 4.

Arif Habib Limited compiled key takeaways from the meeting’s outcome, here they are:

– National CPI has swelled up to 31.5% YoY during February 2023, with core inflation at 17.1% in urban and 21.5% in the rural basket.

– The near-term inflation outlook has deteriorated post external and fiscal adjustments undertaken recently.

– The MPC has raised its CPI forecast for the year to 27-29% against the November 2022 forecast of 21-23%.

– Inflation in upcoming months can drift higher, albeit, at a gradual pace, as the impact of said adjustments unfolds.

– The committee noted that external account challenges persist despite the significant contraction in the current account deficit, recorded at $242 million in January 2023 (lowest since March 2021).

– Pressure on forex reserves and rupee-dollar parity also remain in place, regardless of a 67% decline in current account deficit in the Jul-Jan 2023 period given ongoing debt repayments, and lower financial inflows amid “rising global interest rates and domestic uncertainties.”

– The conclusion of the ninth review of the IMF’s EFF remains crucial to address external-sector vulnerabilities.

– Additionally, the MPC urged the implementation of energy conservation measures to alleviate pressure on the external account and to meet vital imports from other sectors.

– Fiscal consolidation remains critical for economic stability and recent measures like increase in GST and excise duties, restricted subsidies, and adjustment in energy prices should help contain the widening fiscal and primary deficits.

– This will complement the ongoing monetary tightening and help bring down inflation over the medium term.

– The committee also assessed the impact of further monetary tightening on the country’s financial stability and near-term growth.

– It was observed that “risks to financial stability remain contained, given that financial institutions are broadly well capitalized.”

– However, growth will be compromised as a trade-off.

– However, the MPC reiterated that the long-term costs of letting inflation become entrenched outweigh the immediate costs of bringing it down.

– Barring any future shocks, the committee believes that today’s decision has pushed the real interest rate into positive territory on a forward-looking basis.

– The medium-term CPI target remains unchanged at 5-7%, by end-FY25.

Business

The amount of trade between Saudi Arabia and Pakistan hits $700 million.

Published

19 hours ago

Farwa

Through the Special Investment Facilitation Council (SIFC), Pakistan’s trade connections with Saudi Arabia have grown significantly, with bilateral trade volume rising from $546 million to $700 million and exports to the Kingdom growing by 22%.

As bilateral economic cooperation continues to grow, Saudi investors have shown a strong interest in Pakistan’s construction, energy, agricultural, and information technology sectors. The objective for exporting IT services between the two countries has been raised from $50 million to $100 million.

Saudi Arabia has set up a help desk dedicated to making it easier for Pakistani IT companies to register in the Kingdom in order to expedite commercial procedures. The goal of this program is to speed up economic collaborations between the two countries and lower administrative barriers.

The well-known Saudi restaurant chain AlBaik has revealed plans to open locations in Pakistan, which is a big step for the food service industry and should lead to the creation of new job possibilities in the area.

Officials have noted that stronger business links between the two countries lead to greater economic stability, and the SIFC has played a crucial role in promoting these trade advancements. For bilateral trade and investment projects, the Council remains a crucial facilitator.

According to a trade official with knowledge of the developments, “the establishment of dedicated support mechanisms, such as the help desk for IT companies, demonstrates a commitment to long-term economic partnership,” The goal of these programs is to improve the conditions for commercial collaboration between the two nations.

The increasing amount of trade and the diversity of investment sectors show that Saudi Arabia and Pakistan’s economic ties are changing as both countries seek to deepen their business alliances in a number of industries.

Business

After more than 50 years, Bangladesh and Pakistan resume direct trade.

Published

19 hours ago

Farwa

After more than 50 years, the two governments will resume direct bilateral trade, with Bangladesh’s food ministry announcing Sunday that it will receive a supply of 25,000 tonnes of rice from Pakistan next month.

After former Prime Minister Sheikh Hasina was overthrown last August, relations between Bangladesh and Pakistan have begun to improve after decades of tense relations.

Since then, there have been increased bilateral interactions between Bangladesh and Pakistan. Nobel laureate Muhammad Yunus, the interim government’s senior adviser, has met twice with Pakistani Prime Minister Shehbaz Sharif.

According to the food ministry, Dhaka completed an agreement earlier this month to import grains from Pakistan.

“On March 3, the first shipment of 25,000 tonnes will reach Bangladesh,” Zia Uddin Ahmed, a ministry assistant secretary, told Arab News.

“This is the first time that Bangladesh has started importing rice from Pakistan at the government-to-government level since 1971.”

Following direct maritime contact between the two South Asian countries in November—a Pakistani cargo ship stopped in Bangladesh for the first time since 1971 with imports and exports arranged by private companies—their trade relations grew.

Resuming trade with Pakistan is a significant step for Bangladesh, according to Amena Mohsin, a lecturer at North South University and a specialist in international relations.

“We want to see progress in our bilateral relationship with Pakistan. Most significantly, we are currently going through a low point dispute with India, even though we constantly diversify our partnerships.

This most recent move to purchase rice from Pakistan is really significant in this context,” she told Arab News.

Business

The total amount of Pakistan’s liquid foreign reserves is $15.95 billion.

Published

4 days ago

Farwa

As of February 14, Pakistan’s total liquid foreign reserves were $15,947.9 million, with the State Bank of Pakistan’s (SBP) holdings being $11,201.5 million.

Official figures for the week ending February 14, 2025, show that the central bank’s liquid foreign exchange reserves rose by $35 million to $11,201.5 million.

Commercial banks maintained net foreign reserves of $4,746.4 million during the period under review, according to the breakdown of foreign reserves.

The nation’s total liquid foreign reserves as of the week ending February 07, 2025, were $15,862.6 million.

Of these, the central bank held $11,166.6 million in foreign reserves, while commercial banks kept $4,696 million in net reserves.