Business

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

Published

11 months 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

Pakistan’s gold prices are still declining; see the most recent

Published

2 days ago

Farwa

The price of 10-gram gold reduced by Rs943 to settle at Rs207,733, while the price of gold dropped by Rs1200 to close at Rs242,300 a tola, according to the Sindh Sarafa Jewellers Association.

In the global market, the price of the precious metal fell by $10 to $2,349 per ounce, resulting in losses.

At 04:48 GMT, the spot price of gold had dropped by 0.2% to $2,354.77 per ounce. In the previous session, prices reached a two-week high.

American gold futures dropped 0.6% to $2,361.

Spot silver decreased by 0.4% to $28.03 per ounce, while palladium remained steady at $978.03 and platinum decreased by 0.1% to $992.89.

Business

Pakistan and the IMF begin talks for a new loan.

Published

2 days ago

Farwa

Pakistan is requesting a $6 to $8 billion bailout package from the international lender over the next three to four years to address its financial troubles.

A mission team led by Nathan Porter, the IMF’s Mission Chief in Pakistan, is meeting with a Pakistani delegation led by Finance Minister Muhammad Aurangzeb.

According to sources familiar with the situation, Islamabad may face more difficult options, such as raising power and gas bills.

Mr. Aurganzeb informed the IMF team that the country’s economy has improved as a result of the IMF loan package, and Islamabad is ready to sign a new loan programme to further develop.

The IMF mission expressed satisfaction with Islamabad’s efforts to revive the country’s struggling economy.

The IMF praised Pakistan’s economic growth in its staff report earlier this week, but warned that the outlook remains challenging, with very high downside risks.

The country nearly avoided collapse last summer, and its $350 billion economy has stabilized since the end of the last IMF program, with inflation falling to roughly 17% in April from a record high of 38% last May.

Business

Petrol prices are likely to drop significantly beginning May 16.

Published

2 days ago

Farwa

According to sources, the government is set to decrease petrol prices by Rs 14 per litre and diesel prices by Rs 10 on May 16 for the next fortnight’s revision.

Last month, the government reduced the price of fuel and high-speed diesel by Rs5.45 and Rs8.42 per fortnight, respectively.

The current fuel price is Rs288.49 per litre, while the HSD price is Rs281.96.

Meanwhile, oil prices fell further on Monday, as signs of sluggish fuel consumption and comments from U.S. Federal Reserve officials dimmed optimism for interest rate reduction, which may slow growth and reduce fuel demand in the world’s largest economy.

Brent crude prices down 25 cents, or 0.3%, to $82.54 a barrel, while US West Texas Intermediate crude futures fell 19 cents, or 0.2%, to $78.07 per barrel.

Oil prices also declined on signals of poor demand, according to ANZ analysts, as gasoline and distillate inventories in the United States increased in the week before the start of the driving season.

Refiners throughout the world are dealing with falling diesel profitability as new refineries increase supply and warm weather in the northern hemisphere and weak economic activity reduce demand.