Business

Monetary policy: SBP holds interest rate at 22%

Published

1 year ago

Farwa

In line with market expectations, MCP leaves benchmark interest rate unchanged for the next one and half month.

MPC’s decision is in line with market expectations.
Interest rate unchanged for next one-and-half month.
MPC says inflation rose in September 2023 as expected.

The State Bank of Pakistan (SBP) Monday decided to hold the key policy rate at 22%, in line with the market expectations, with the next announcement on December 12.

In a statement, the central bank said: “At its meeting today, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 22 percent.”

The committee noted that headline inflation rose in September 2023 (31.4%) as expected — a major factor in determining the key policy rate.

However, the SBP said, it is projected to decline in October and then maintain a downward trajectory, especially in the second half of the fiscal year.

The MPC expects inflation to decline significantly in October due to downward adjustments in fuel prices, easing prices of some major food commodities, and a favorable base effect.

“The Committee also reaffirmed its earlier assessment that inflation will decline substantially from the second half of FY24, barring any major adverse developments,” it added.

The central bank acknowledged that the recent volatility in global oil prices as well as the increase in gas tariffs from November pose some risks to the FY24 outlook for inflation and the current account.

“The committee also noted some offsetting factors: These include the targeted fiscal consolidation in Q1; improvement in market availability of key commodities; and the alignment of interbank and open market exchange rates.”

The MPC noted four key developments since its September meeting —

The initial estimates for Kharif crops are encouraging and will have positive effects on other key sectors of the economy.
Second, the current account deficit narrowed considerably in August and September, which helped to stabilise the SBP’s FX reserves position amidst tepid external financing in these two months.
Fiscal consolidation remained on track, with both fiscal and primary balances improving during Q1-FY24.
While core inflation remains sticky, inflation expectations of both consumers and businesses improved in the latest pulse surveys.

The SBP said that in light of these developments, the MPC emphasised on continuing with the tight monetary policy stance.

The MPC, the statement mentioned, reiterated its earlier view that the real policy rate is significantly positive on a 12-month forward-looking basis and is appropriate to bring inflation down to the medium-term target of 5 – 7 percent by the end of FY25.

“However, the MPC noted that this outlook is based on continued fiscal consolidation and timely realization of planned external inflows,” the central bank’s statement added.

Since the last MPC meeting on September 14, when the interest rate was kept unchanged, several developments have taken place — the appreciation of rupee, decrease in petrol prices, expected inflation, decrease in the current account deficit and forex reserves.

Head of Equities at Intermarket Securities Raza Jafri told Geo.tv that the SBP was unlikely to rock the boat on the cusp of the International Monetary Fund (IMF) review and has unsurprisingly kept the policy rate unchanged at 22%.

However, he said, it does seem to be setting up grounds for interest rate cuts going forward, especially if the IMF review is successful and international oil prices remain under control.

Business

SFD and Pakistan Sign Two Deals Totaling $1.61BLN

Published

1 day ago

Farwa

Two agreements totaling $1.61 billion have been inked by Pakistan and the Saudi Fund for Development to improve their bilateral economic cooperation.

Business

Saudi Arabia and Pakistan sign an MOU to strengthen their auditing industry collaboration.

Published

1 day ago

Farwa

A spokesperson for the office of the Auditor-General of Pakistan (AGP) announced on Monday that the two countries have signed a Memorandum of Understanding (MoU) to strengthen cooperation in public sector auditing through improved cooperation between audit institutions of both countries, as well as training programs and the exchange of trainers.

This comes as a group from Saudi Arabia’s General Court of Audit (GCA), headed by GCA President Dr. Hussam bin Abdulmohsen Alangari, arrived in Pakistan on Sunday for a four-day visit.

The agreement was signed during AGP Muhammad Ajmal Gondal’s meeting with the Saudi delegates, aiming to strengthen audit cooperation, enhance knowledge-sharing, and improve governance, transparency and accountability in government spending.

Public relations officer Muhammad Raza Irfan of the AGP’s office told Arab News that the deal will further advance bilateral collaboration between Saudi Arabia and Pakistan in addition to enhancing professional ties between the two nations’ auditing institutions.

In a statement released from his office, AGP Gondal was cited as saying, “This collaboration marks a significant step toward fostering international cooperation in auditing.”

“The exchange of ideas and methodologies will undoubtedly strengthen our capacity to meet emerging challenges and set new benchmarks for public accountability.”

Discussions at Monday’s meeting focused on fostering closer ties between the Supreme Audit Institutions (SAIs) of Pakistan and Saudi Arabia, sharing innovative audit methodologies, and planning collaborative initiatives for the future, according to the AGP office.

The two parties decided to increase their knowledge of theme, environmental, and impact audits as well as to exchange best practices in audit standards, performance audits, and citizen participation audits.

The statement added, “It also agreed to exchange trainers, address new auditing challenges, plan cooperative audits, including a performance audit on the oil and gas sector in 2025, and work together on training programs.”

Both sides reaffirmed their shared commitment to promoting transparency, accountability and excellence in public sector auditing.

Business

The government chooses to continue the PIA privatization process.

Published

1 day ago

Farwa

The Pakistan International Airlines (PIA) privatization process will be restarted by the federal government, and expressions of interest would be requested within the month. Officials stated that the Prime Minister’s Committee on Privatization will convene to make the final decision.

Usman Bajwa, the secretary of the Privatization Commission, gave a briefing on the updated procedure to the National Assembly Standing Committee on Privatization. Additionally, he disclosed that airlines other than PIA are now able to compete with regional carriers thanks to IMF-approved aircraft tax concessions.

Farooq Sattar, the chairman of the privatization committee, underlined the importance of giving PIA workers at least five years of job security. Employee protection will continue to be a top priority and will be resolved prior to bidding, the Privatization Commission promised.

PIA’s liabilities totaling Rs650 billion have already been assumed by the government, and an additional Rs45 billion in outstanding debts must be paid before the privatization process can begin. As of the now, PIA has assets around Rs155 billion and liabilities worth Rs200 billion. It will be necessary for the new buyer to expand the fleet by 15 to 20 aircraft.

Additionally, the Privatization Committee has sought a timeline for the privatization of Faisalabad, Gujranwala, and Islamabad Electric Supply Companies. Officials stated that after the appointment of a financial advisor, the privatization process for these companies will accelerate.