Business

SBP jacks up key rate to record high of 22% after withdrawal of guidance on imports

Published

2 years ago

Farwa

Since Jan 2022, SBP has raised rates by a total of 1,250bps.
Says decision necessary to keep real interest rate in positive territory.
Also states decision would help “anchor inflation expectations”.

Following withdrawal of its guidance on imports, the State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday decided to jack up the policy rate by 100bps to 22% in an emergency meeting days after it had announced no change in the interest rate.

Since January 2022, the central bank has raised rates by a total of 1,250bps.

In a statement, the MPC explained the contest of the emergency meeting as in the last meeting on June 12 it had decided not to jack up the policy rate. Back then it had viewed it as appropriate to achieve the objective of price stability “barring any unexpected domestic and external shocks”.

However, the SBP said that it has now decided to increase the interest rate because of “two important domestic developments” that have “slightly deteriorated inflation outlook and which could potentially increase pressure on the already stressed external account”.

“First, there are certain upward revisions in taxes, duties and PDL rate in FY24 budget as approved by the National Assembly on June 25. Second, the SBP, on June 23, withdrew its general guidance for commercial banks on prioritisation of imports,” the MPC said. It added that the withdrawal of the guideline on imports was “necessary” due to the ongoing negotiations with the International Monetary Fund (IMF) but has “increased the upside risks to the inflation outlook”.

“The committee views that additional tax measures are likely to contribute to inflation both directly and indirectly, while the relaxation in imports may exert pressures in the foreign exchange market. The latter may result in higher-than-earlier anticipated exchange rate pass-through to domestic prices,” it further added.

“With this background, the MPC convened an emergency meeting to respond to these developments. The MPC decided to raise the policy rate by 100 bps to 22 per cent, effective 27th June 2023,” said the central bank. It added the decision was “necessary to keep real interest rate firmly in the positive territory on a forward-looking basis”.

The central bank also believes that the decision would help “anchor inflation expectations” and “support bringing down inflation towards the medium-term target of 5–7% by the end of FY25”.

“The MPC views that today’s decision — along with the expected completion of the ongoing IMF program and the government adhering to the target of generating a primary surplus in FY24 would help in addressing external sector vulnerabilities and reduce economic uncertainty. The committee reiterated that it would continue to carefully monitor evolving economic developments and stands ready, if necessary, to take appropriate action to achieve the objective of price stability over the medium term,” the SBP said.

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.