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Category: Money & Banking

Money and banking drive economic activity by facilitating transactions, savings, and investments. Banks manage financial resources, offer credit, and regulate money supply, ensuring stability and growth in Pakistan’s financial sector.

  • Dollar hits new high at Rs205.40 in midday interbank trading

    Dollar hits new high at Rs205.40 in midday interbank trading

    KARACHI: The US dollar reached another historic high of Rs205.40 during midday interbank trading on Tuesday.

    The rupee witnessed a decline of R1.54 from last day’s closing of Rs203.86, which was the record low of the local unit to the dollar in interbank foreign exchange market.

    READ MORE: Pakistani rupee falls to historic low of Rs203.86 to dollar

    The currency experts said that the sharp decline in foreign exchange reserves also put pressure on exchange rate.

    The rupee hit all-time low at 202.83 against the dollar at interbank closing on June 7, 2022.

    Currency experts said that the market remained volatile during the day. This is causing discomfort in the market. Shaking confidence of importers, exporter and foreign investor, according to the expert.

    READ MORE: Dollar hits new peak at Rs204 during midday trading

    The currency experts said that the rupee was under immense pressure due to import payment demand and falling foreign exchange reserves.

    The official foreign exchange reserves of the State Bank of Pakistan (SBP) have fallen by $497 million to $9.226 billion by week ended June 03, 2022 as compared with $9.723 billion a week ago i.e. May 27, 2022.

    Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

    READ MORE: Rupee recovers to Rs201.52 to dollar in volatile trading

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $10.92 billion by the week ended June 03, 2022 from touching the peak.

    Overall the foreign exchange reserves of the country declined by $595 million to $15.176 billion by the week ended June 03, 2022 as compared with $15.771 billion a week ago.

    They said that usually import payments are high in the last month of a fiscal year, especially for oil imports.

    READ MORE: Dollar hits record high at Rs202.83 in interbank

    It is pertinent to mention that the government had twice increased the prices of petroleum products since May 26, 2022 in order to satisfy the International Monetary Fund (IMF) for the release of next tranche of about $1 billion.

    Although the since announcement of raising petroleum prices the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.

    The government on May 26, 2022 decided partially withdraw the subsidy to get the next tranche of the IMF, the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during the past five sessions.

    The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.

    READ MORE: Dollar hits Rs200.06 as rupee falls sharply in interbank

    The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.

    Recently the government announced a complete ban on imports to support balance of payment and help the rupee to stabilize. However, these measures appeared in failure as the exchange rate yet again deteriorated today massively.

  • High tax may erode banks’ earnings up to 20%

    High tax may erode banks’ earnings up to 20%

    KARACHI: The proposed corporate tax rate for banks may erode earnings of the sector by up to 20 per cent on annual basis.

    The government presented federal budget on June 10, 2022 and proposed enhancement in tax rates for banking companies.

    READ MORE: Pakistan slaps 45% corporate tax on banks

    The government announced various taxation measures on the banking sector in the Budget 2022/2023. This includes i) increase in corporate tax to 45 per cent against existing 35 per cent, ii) imposition of poverty alleviation tax of 2 per cent and iii) hike in tax rate in case of adverse Asset to Deposit Ratio (ADR).

    New rates would be applicable from Jul 1, 2022 subject to the approval of National Assembly.

    READ MORE: Tax rates for business individuals, AOPs during TY2023

    Analysts at KTrade expect this development to erode the KTrade’s banking sector earnings by 15 per cent – 20 per cent cumulatively, on an annual basis. Consequently, they have revised down target prices by 15 per cent.

    1) Corporate tax enhanced to 45 per cent: The government proposed to increase the taxation to 45 per cent from 2023 onwards in order to meet the direct tax collection target of Rs2.6 trillion for 2022-2023. The analysts expect this to erode banking sector’s earnings by an average of 10.5 per cent on an annual basis.

    READ MORE: Pakistan reintroduces advance tax on foreign payments

    Type of Tax20222023 and onwards
    Corporate Tax35 per cent45 per cent
    Super Tax4 per cent0 per cent
    Poverty Alleviation Tax2 per cent2 per cent

    2) Adverse tax measures on low ADR: Banks would face higher taxation if the ADR threshold falls below 50 per cent. As a reminder, average ADR of banking sector improved to 48.5 per cent in Mar22 as opposed to 45.2 per cent in the same period last year. New rates as per the Finance Bill are as follows:

    READ MORE: Exchange companies to withhold tax on payment to MTOs

     Gross Advances to Deposits RatioExisting Rate of TaxProposed Rate of Tax
    Upto 40 per cent40.0 per cent55.0 per cent
    40 per cent – 50 per cent37.5 per cent49.0 per cent
    Exceeding 50 per cent35.0 per cent45.0 per cent

    Within Ktrade universe, the analysts highlight BAFL, MEBL and HBL to remain immune because of exceeding the threshold ADR with ADR standing at 60 per cent, 54 per cent, and 50 per cent respectively.

    Meanwhile, UBL, MCB and ABL with ADR of 45 per cent would face the negative consequences of higher taxation of 49 per cent.

    This would result in further earnings attrition to the tune of 7 per cent for the said companies.

  • Pakistani rupee falls to historic low of Rs203.86 to dollar

    Pakistani rupee falls to historic low of Rs203.86 to dollar

    KARACHI: Pakistani Rupee (PKR) fell to a historic low of Rs203.86 against the dollar at closing of interbank foreign exchange market on Monday.

    The exchange rate witnessed a decline of Rs1.51 in rupee value to end at Rs203.86 against the dollar from last Friday’s closing of Rs202.35 in the interbank foreign exchange market.

    The local currency previously witnessed the lowest level of Rs202.83 to the dollar on June 07, 2022.

    Currency experts said that massive decline in foreign exchange reserves and high import payment demand kept the local unit under pressure.

    READ MORE: Rupee falls to Rs202.35 against dollar ahead budget announcement

    They said that the market remained volatile during the day. This is causing discomfort in the market. Shaking confidence of importers, exporter and foreign investor, according to the expert.

    The official foreign exchange reserves of the State Bank of Pakistan (SBP) have fallen by $497 million to $9.226 billion by week ended June 03, 2022 as compared with $9.723 billion a week ago i.e. May 27, 2022.

    Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

    READ MORE: Rupee gains against dollar, ends at Rs200.77 in interbank

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $10.92 billion by the week ended June 03, 2022 from touching the peak.

    Overall the foreign exchange reserves of the country declined by $595 million to $15.176 billion by the week ended June 03, 2022 as compared with $15.771 billion a week ago.

    They said that usually import payments are high in the last month of a fiscal year, especially for oil imports.

    READ MORE: Rupee recovers to Rs201.52 to dollar in volatile trading

    It is pertinent to mention that the government had twice increased the prices of petroleum products since May 26, 2022 in order to satisfy the International Monetary Fund (IMF) for the release of next tranche of about $1 billion.

    Although the since announcement of raising petroleum prices the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.

    The government on May 26, 2022 decided partially withdraw the subsidy to get the next tranche of the IMF, the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during the past five sessions.

    READ MORE: Dollar hits record high at Rs202.83 in interbank

    The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.

    The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.

    Recently the government announced a complete ban on imports to support balance of payment and help the rupee to stabilize. However, these measures appeared in failure as the exchange rate yet again deteriorated today massively.

  • Dollar hits new peak at Rs204 during midday trading

    Dollar hits new peak at Rs204 during midday trading

    KARACHI: The US dollar reached to all-time high at Rs204.00 during midday trading in interbank foreign exchange market on Monday.

    The Pakistan Rupee (PKR) witnessed deterioration early this morning due to first day of the week and immense pressure from payment side.

    READ MORE: Rupee falls to Rs202.35 against dollar ahead budget announcement

    The rupee closed Rs202.35 to the dollar on June 10, 2022 in interbank market. So far the dollar gained Rs1.65 during today’s trading.

    The currency experts said that the sharp decline in foreign exchange reserves also put pressure on exchange rate.

    READ MORE: Rupee gains against dollar, ends at Rs200.77 in interbank

    The rupee hit all-time low at 202.83 against the dollar at interbank closing on June 7, 2022.

    Currency experts said that the market remained volatile during the day. This is causing discomfort in the market. Shaking confidence of importers, exporter and foreign investor, according to the expert.

    READ MORE: Rupee recovers to Rs201.52 to dollar in volatile trading

    The currency experts said that the rupee was under immense pressure due to import payment demand and falling foreign exchange reserves.

    The official foreign exchange reserves of the State Bank of Pakistan (SBP) have fallen by $497 million to $9.226 billion by week ended June 03, 2022 as compared with $9.723 billion a week ago i.e. May 27, 2022.

    READ MORE: Dollar hits record high at Rs202.83 in interbank

    Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $10.92 billion by the week ended June 03, 2022 from touching the peak.

    READ MORE: Dollar hits Rs200.06 as rupee falls sharply in interbank

    Overall the foreign exchange reserves of the country declined by $595 million to $15.176 billion by the week ended June 03, 2022 as compared with $15.771 billion a week ago.

    They said that usually import payments are high in the last month of a fiscal year, especially for oil imports.

    READ MORE: Dollar rebounds to Rs197.92; halts rupee’s gaining streak

    It is pertinent to mention that the government had twice increased the prices of petroleum products since May 26, 2022 in order to satisfy the International Monetary Fund (IMF) for the release of next tranche of about $1 billion.

    Although the since announcement of raising petroleum prices the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.

    The government on May 26, 2022 decided partially withdraw the subsidy to get the next tranche of the IMF, the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during the past five sessions.

    READ MORE: Dollar weakens for 5th straight day; ends at Rs197.59

    The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.

    The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.

    Recently the government announced a complete ban on imports to support balance of payment and help the rupee to stabilize. However, these measures appeared in failure as the exchange rate yet again deteriorated today massively.

  • Pakistan slaps 45% corporate tax on banks

    Pakistan slaps 45% corporate tax on banks

    ISLAMABAD: Pakistan has slapped corporate income tax at 45 per cent on banks, which is raised from 35 per cent.

    The country presented its federal budget on June 10, 2022 and introduced tax measures for boosting revenue collection.

    READ MORE: Tax rates for business individuals, AOPs during TY2023

    Through Finance Bill, 2022 the tax rate for banking companies have been proposed to increase to 45 per cent from existing 35 per cent.

    In this regard, the bill proposed amendment to Division II, Part I of First Schedule of the Income Tax Ordinance, 2001.

    Proposed Rates of Tax for Companies

    READ MORE: Pakistan reintroduces advance tax on foreign payments

    The rate of tax imposed on the taxable income of a company shall be as set out in the following Table, namely:-

    Type of CompanyRate of Tax
    Small company20%
    Banking company45%
    Any other company29%

    Following are the existing rates of tax for corporate entities for tax year 2022:

    (i) The rate of tax imposed on the taxable income of a company for the tax year 2007 and onward shall be 35%:

    Provided that the rate of tax imposed on the taxable income of a company other than a banking company, shall be 34% for the tax year 20145:

    READ MORE: Exchange companies to withhold tax on payment to MTOs

    Provided further that the rate of tax imposed on the taxable income of a company, other than a banking company, shall be 33% for the tax year 2015:

    “Provided further that the rate of tax imposed on taxable income of a company, other than banking company shall be 32% for the tax year 2016, 31% for tax year 2017, 30% for tax year 2018 and 29% for tax year 2019 and onwards.

    READ MORE: Salaried persons denied adjustments against deduction

    (iii) where the taxpayer is a small company as defined in section 2, tax shall be payable at the rate of 25%:

    Provided that for tax year 2019 and onwards tax rates shall be as set out in the following Table, namely:—

    Tax yearRate of Tax
    201924%
    202023%
    202122%
    202221%
    2023 and onwards20%”
  • Pakistan reintroduces advance tax on foreign payments

    Pakistan reintroduces advance tax on foreign payments

    ISLAMABAD: Pakistan has reintroduced advance tax on foreign payments made through credit, debit or prepaid cards. The advance tax has been revived through Finance Bill, 2022.

    (more…)
  • Pakistan amends tax laws to legalize money transfers

    Pakistan amends tax laws to legalize money transfers

    ISLAMABAD: Pakistan has amended tax laws to grant approval of legal banking channels to money transfer by money transfer operators and bureaus.

    The country presented budget 2022/2023 on June 10, 2022 and amended tax laws to grant approval the money transfer made through operators, bureaus and exchange companies.

    Through Finance Bill, 2022 amendment made to Section 111 of the Income Tax Ordinance, 2001. The Section 111 is related to undeclared money and assets.

    An explanation has been proposed to sub-section 4 of Section 111 to the Income Tax Ordinance, 2001, which is as follow:

    READ MORE: Fixed tax rates for retailers, payable through electricity bills

    “Explanation.— For removal of doubt, it is clarified that the remittance through money service bureaus, exchange companies or money transfer operators shall be deemed to constitute foreign exchange remitted from outside Pakistan through normal banking channels as provided under this sub-section.”

    Previously, the Federal Board of Revenue (FBR) on September 24, 2021 said that tax authorities will not ask source of foreign exchange not exceeding Rs5 million remitted through exchange companies (ECs) or money transfer operators.

    READ MORE: Pakistan amends laws to hunt tax evaders living abroad

    The FBR issued explanation to the Tax Laws (Third Amendment) Ordinance, 2021.

    The revenue body said Section 111(4) of Income Tax Ordinance, 2001 provides exclusion from unexplained income or assets to any amount of foreign exchange remitted from outside Pakistan through normal banking channels not exceeding Rs5 million en-cashed into rupees by a scheduled bank.

    The amendment through insertion of an explanation has now also treated remittances through Money Service Bureaus (MCBs), Exchange Companies (ECs) and Money Transfer Operators (MT0s) or other similar entities as foreign exchange remitted from outside Pakistan through normal Banking channels.

    After a formal clarification from SBP, Circular No. 05 of 2022 was issued by the Board.

    READ MORE: CGT up to 15% slapped on immovable properties

    Through this amendment the FBR’s clarification has now been made part of legislation to facilitate foreign remittance and align the law with innovations that have taken place in the banking industry.

    Through the Circular No. 05 of 2022, the FBR has withdrawn all the appeals pertaining to income tax exemption on inward foreign remittances.

    “In order to win the trust of the taxpayers and spare the public resources for more productive use elsewhere, all departmental appeals filed on the strict sensu interpretation of the law, be withdrawn immediately, and no further appeals be filed if one all fours of this clarification,” according to the circular.

    Further, all circulars and instructions issued on the matter previously issued stand rescinded, the FBR added.

  • Rupee falls to Rs202.35 against dollar ahead budget announcement

    Rupee falls to Rs202.35 against dollar ahead budget announcement

    KARACHI: The Pakistani Rupee (PKR) sharply fell by Rs1.58 to the dollar on Friday ahead of the budget announcement for fiscal year 2022/2023 and massive decline in foreign exchange reserves.

    The exchange rate ended with a decline of Rs1.58 in rupee value to Rs202.35 as compared with previous day’s closing of Rs200.77 in the interbank foreign exchange market.

    READ MORE: Rupee gains against dollar, ends at Rs200.77 in interbank

    The rupee hit all-time low at 202.83 against the dollar on June 7, 2022.

    Currency experts said that the market remained volatile during the day. This is causing discomfort in the market. Shaking confidence of importers, exporter and foreign investor, according to the expert.

    The currency experts said that the rupee was under immense pressure due to import payment demand and falling foreign exchange reserves.

    READ MORE: Rupee recovers to Rs201.52 to dollar in volatile trading

    The official foreign exchange reserves of the State Bank of Pakistan (SBP) have fallen by $497 million to $9.226 billion by week ended June 03, 2022 as compared with $9.723 billion a week ago i.e. May 27, 2022.

    Previously, the foreign exchange reserves held by the central bank were seen at $9.233 billion on December 6, 2019.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since touching the peak the central bank’s foreign exchange witnessed a continuous decline. The official reserves of the SBP fell around $10.92 billion by the week ended June 03, 2022 from touching the peak.

    READ MORE: Dollar hits record high at Rs202.83 in interbank

    Overall the foreign exchange reserves of the country declined by $595 million to $15.176 billion by the week ended June 03, 2022 as compared with $15.771 billion a week ago.

    They said that usually import payments are high in the last month of a fiscal year, especially for oil imports.

    It is pertinent to mention that the government had twice increased the prices of petroleum products since May 26, 2022 in order to satisfy the International Monetary Fund (IMF) for the release of next tranche of about $1 billion.

    READ MORE: Dollar hits Rs200.06 as rupee falls sharply in interbank

    Although the since announcement of raising petroleum prices the rupee witnessed a recovery. However, the falling foreign exchange reserves of the central bank once again put pressure on the local unit.

    The government on May 26, 2022 decided partially withdraw the subsidy to get the next tranche of the IMF, the rupee sharply made gains against the dollar. The local unit made a recovery of Rs4.42 against the dollar during the past five sessions.

    The rupee remained under pressure against the greenback during the current fiscal year. The State Bank of Pakistan (SBP) has taken various measures to support balance of payment and the local currency. However, the measures ended in a failure to help the rupee to recover losses.

    READ MORE: Dollar rebounds to Rs197.92; halts rupee’s gaining streak

    The SBP on May 23, 2022 announced a sharp increase in policy rate by 150 basis points to 13.75 per cent from 12.25 per cent.

    Recently the government announced a complete ban on imports to support balance of payment and help the rupee to stabilize. However, these measures appeared in failure as the exchange rate yet again deteriorated today massively.

    READ MORE: Dollar weakens for 5th straight day; ends at Rs197.59

  • Pakistan receives $28.41 billion as workers remittances in 11 months

    Pakistan receives $28.41 billion as workers remittances in 11 months

    KARACHI: The inflow of workers’ remittances recorded an increase of 6.25 per cent to $28.41 billion during the first 11 months (July – May) 2021/2022, State Bank of Pakistan (SBP) said on Friday.

    The country received an amount of $26.74 billion in the same period of the last fiscal year.

    READ MORE: SBP issues instructions on Hajj related outward remittances

    The inflows in May 2022 recorded $2.33 billion when compared with $3.12 billion in April 2022, showing a decline of 25 per cent. The remittances in May 2022 also fell by 6.8 per cent when compared with $2.5 billion received in May 2021.

    Remittances in May 2022 were mainly sourced from Saudi Arabia ($542 million), United Arab Emirates ($435 million), United Kingdom ($354 million) and the United States of America ($233 million).

    READ MORE: SBP jacks up policy rate by 6.75% to 13.75%

    Pakistani workers residing in the US sent an amount of $2.79 billion during the first 11 months of the current fiscal year as compared with $2.35 billion in the same months of the last fiscal year, showing a growth of 18.5 per cent. Similarly, inflows of remittances from the UK registered a growth of 8.5 per cent to $4.02 billion during the period under review as compared with $3.71 billion in the same period of fiscal year 2020/2021.

    The Pakistani workers living in the UAE sent an amount of $5.33 billion during July – May 2021/2022 as against $5.61 billion in the corresponding period of the last fiscal year, showing a decline of 5 per cent.

    READ MORE: SBP lifts quarantine requirement for banknotes

    The inflows from Saudi Arabia remained flat at $7.06 billion during the first eleven months of the current fiscal year as compared with $7.04 billion in the same period of the last fiscal year.

  • SBP jacks up policy rate by 6.75% to 13.75%

    SBP jacks up policy rate by 6.75% to 13.75%

    ISLAMABAD: The State Bank of Pakistan (SBP) has increased the key policy rate by 6.75 per cent during September 2021 to May 2022, according to Economic Survey of Pakistan 2021/2022 released on Thursday.

    The survey stated that Pakistan’s economy has witnessed a V-shaped recovery in 2020-2021 after witnessing a contraction of 0.9 percent in FY2020.

    After the COVID outbreak, the policy rate was reduced by 6.25 per cent within short span of less than three months, during March-June 2020. This was the largest policy rate cut in emerging market economies.

    READ MORE: Tax to GDP ratio estimated at 10.8% in FY22: Economic Survey

    During FY2021, the SBP maintained an accommodative monetary policy stance, by keeping the policy rate unchanged at 7.0 percent throughout FY2021.

    Besides, SBP provided liquidity and regulatory support to businesses and households during the challenging times. The economic policy was implemented with a prudent mix which supported the economic recovery without putting any pressure on macroeconomic imbalances.

    With heightened uncertainty due to COVID-19, the Monetary Policy Committee for the first time considered it appropriate to provide some forward guidance on monetary policy in its January 2021 meeting, to facilitate policy predictability and decision making by economic agents.

    In the absence of unforeseen developments, the Monetary Policy Committee (MPC) expected monetary policy settings to remain unchanged in the near term.

    READ MORE: LSM posts 10.4% growth in July – March: Economic Survey

    Moreover, in the subsequent monetary policy decisions during FY2021, the MPC has maintained the policy rate of 7.0 percent to nurture the economic recovery.

    At the end of first quarter FY2022, policy rate has increased by 25 basis points (bps) to 7.25 percent. The decision was primarily based on observation of excess aggregate demand and more than expected economic recovery as reflected by rising high import bill and increasing current account deficit.

    The objective of monetary policy was shifted to ensuring the appropriate policy mix to protect the longevity of growth, keep inflation expectations anchored, and control the current account deficit.

    In subsequent Monetary Policy decisions announced in November and December, 2021, policy rate was increased by 150 bps and 100 bps to 8.75 percent and 9.75 percent, respectively. The decision was made due to heightened risks associated with inflation and balances of payments, which stemmed from both global and domestic factors.

    READ MORE: Agriculture surpasses FY22 growth target: Economic Survey

    In Pakistan, high import prices have contributed to higher-than-expected inflation outturns. At the same time, there were also emerging signs of demand-side pressures on inflation from domestic administered prices.

    In December, 2021 Monetary policy decision, MPC explained that the goal of mildly positive real interest rates was now close to being achieved. Looking ahead, the MPC expected monetary policy settings to remain broadly unchanged in the near-term.

    Resultantly, policy rate has kept unchanged at 9.75 percent in two successive decisions held on January and March, 2022.

    However, policy rate was increased by 250 bps to 12.25 percent from 9.75 percent in an unscheduled meeting on 07th April 2022, to address significant uncertainty amidst rising global commodity prices and domestic political situation. The inflation outlook had deteriorated and risks to external stability had increased for FY2022. Externally, futures market suggests that global commodity prices, including oil, are likely to remain elevated for longer and the Federal Reserve is likely to increase interest rates more quickly than previously anticipated, likely leading to a sharper tightening of global financial conditions.

    READ MORE: Per capita income in Pakistan rises to $1,798 in 2021-22

    Domestically, some macroeconomic indicators have deteriorated, as have SBP reserves as a result of debt repayment and political uncertainty.

    In monetary policy decision held on 23rd May, 2022 the MPC decided to raise the policy rate by 150 basis points to 13.75 percent. The decision was based on outcome of provisional growth estimates for FY2022 more than target, shows excess aggregate demand, elevated external sector pressure and the higher inflation outlook due to domestic and international factors.

    In addition to policy rate increase, the interest rates on EFS and LTFF loans are also being raised. The MPC has informed that in future, these rates will be linked to the policy rate and will adjust automatically, while continuing to remain below the policy rate in order to incentivize exports.