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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.

  • Rupee eases by six paisas on import, corporate payment demand

    Rupee eases by six paisas on import, corporate payment demand

    KARACHI: The Pak Rupee ended down by six paisas on Tuesday against dollar owing to higher demand for import and corporate payments.

    The rupee ended Rs168.43 to the dollar from previous day’s closing of Rs168.37 in interbank foreign exchange market.

    Currency experts said that demand from importers and corporate buyers were remained higher during the day which depressed the rupee value.

    They said that the improved inflows of workers’ remittances and export receipts may helped the local unit to improve value.

    The balance of payment of the country registered current account surplus i.e. 1.9 percent of the GDP during the first month of the current fiscal year.

    The BOP witnessed a current account deficit of 2.8 percent of the GDP in July 2019.

    The statistics revealed that the current account surplus stood at $424 million in July 2020 as compared with current account deficit of $613 million in the same month of the last year.

    The current account surplus may be attributed to record inflows of workers’ remittances in July 2020. In the month under review the workers’ remittances rose to $2.77 billion. This is the highest ever level of remittances in a single month in Pakistan, according to the SBP.

    The exports also exhibited 6.1 percent growth to $2 billion in July 2020 as compared with $1.88 billion in the same month of the last year. On the other hand the import bill of the country declined by 0.7 percent to $3.68 billion in July 2020 as compared with $3.71 in the same month of the last year.

    The trade deficit narrowed by 7.7 percent to $1.68 billion in July 2020 as compared with the deficit of $1.83 billion in the same month of the last year.

  • Banks fail to meet agri credit disbursement target

    Banks fail to meet agri credit disbursement target

    KARACHI: Banks have missed agriculture credit disbursement target for fiscal year 2019/2020 by Rs135 billion but the credit disbursement was 3.5 percent higher than the preceding fiscal year, State Bank of Pakistan (SBP) said on Monday.

    The central bank in a statement said that the banks disbursed Rs 1,215 billion to agriculture sector during 2019-2020. This is 3.5 percent higher than the amount disbursed in the previous fiscal year but less than the credit target of Rs 1,350 billion which was set by Agricultural Credit Advisory Committee (ACAC) in Peshawar in November 2019.

    Some factors which have constrained the growth of agriculture credit include the impact of COVID-19 pandemic, locust attack and continuing real side issues including water shortage, low production of cotton, sugarcane, low off take of fertilizers and volatility in prices of agri. produce etc.

    The outstanding portfolio of agriculture credit increased to Rs 581 billion at end June, 2020, registering growth of 3.3 percent compared with the last year’s position of Rs 562 billion.

    However, the number of agriculture borrowers declined from 4.01 million at end June 2019 to 3.74 million at end June 2020 due to the COVID-19 lockdown situation in the country.

    The analysis of disbursement reveals that during FY 2019-20, five major commercial banks collectively disbursed agriculture loans of Rs 708.3 billion or 100.5 percent of their annual target of Rs 705 billion, specialized banks disbursed Rs 71.1 billion or 62.9 percent of their annual target of Rs 113 billion and fourteen domestic private banks as a group achieved 88.7 percent by disbursing Rs 225.0 billion against their target of Rs 253.6 billion.

    Further, the five Islamic Banks as a group achieved 76.6 percent of their annual target of Rs 55.0 billion by disbursing Rs 42.1 billion which is 6.1  percent higher than the disbursement made during the corresponding period last year. Similarly, the Islamic windows of commercial banks disbursed Rs 43.5 billion or 79.2 percent against the target of Rs 55.0 billion in FY 2019-20 which is 33  percent higher from the disbursement of Rs 32.7 billion made during last year.

    The agriculture credit of microfinance sector remained relatively sluggish due to COVID-19 lockdown in the 2nd half of FY 2019-20. The Microfinance Banks (MFBs) as a group have achieved 75.7 percent by disbursing agriculture loans of Rs 139.3 billion to small farmers which is 9.5 percent lower than the disbursement of Rs 154 billion during same period last year.

    Likewise, the Microfinance Institutions/Rural Support Programs collectively achieved 73.4 percent of their targets by disbursing Rs 28.9 billion which is 15  percent lower than the disbursement of Rs 34 billion made during the last year to small and marginalized farmers.

    It is important to mention that SBP announced a comprehensive relief package in collaboration with stakeholders for relief of agriculture sector to deal with the adverse implications of the ongoing pandemic on the farming community and agriculture business in the downstream of value chains. These measures which included deferment of principal and restructuring/rescheduling of agriculture loans were initially allowed uptill June 30, 2020 have been extended upto 30 September 2020.

    SBP will continue to monitor the situation and it may introduce more measures to help the sector manage its finances during this temporary phase of disruption.

  • Rupee ends down by nine paisas on import, corporate payments demand

    Rupee ends down by nine paisas on import, corporate payments demand

    KARACHI: The Pak Rupee ended down by nine paisas against dollar on Monday owing to higher demand for import and corporate payments, dealers said.

    The rupee ended Rs168.38 to the dollar from last Friday’s closing of Rs168.29 in interbank foreign exchange market.

    Currency experts said that the local currency was under pressure due to higher demand for the greenback as market was opened after weekly holidays.

    They hoped that the local currency likely to rebound in coming days due to sufficient supply of the foreign currency in the shape of export receipts and remittances.

    The liquid foreign exchange reserves of the country increased by $137 million to $19.655 billion by week ended August 13, 2020, State Bank of Pakistan (SBP) said.

    The foreign exchange reserves of the country were at $19.518 billion by week ended August 07, 2020.

    The foreign exchange reserves held by the central bank also increased by $139 million to $12.608 billion by week ended August 13, 2020 as compared with $12.469 billion a week ago.

    The SBP attributed the increase in reserves to proceeds of $249.4 million from Asian Infrastructure Investment Bank (AIIB). Meanwhile, during the week, SBP also made government external debt repayments of $151.0 million.

    The foreign exchange reserves held by commercial banks slightly down by $2 million to $7.047 billion by week ended August 13, 2020 as compared with $7.049 billion a week ago.

  • Rupee gains 9 paisas on inflows

    Rupee gains 9 paisas on inflows

    KARACHI: The Pak Rupee gained nine paisas against dollar on Friday owing to improved external inflows of the country.

    The rupee ended Rs168.29 to the dollar from previous day’s closing of Rs168.38 in interbank foreign exchange market.

    Currency experts said that the external inflows and improved foreign exchange reserves of the country helped the local currency to gain value.

    The liquid foreign exchange reserves of the country increased by $137 million to $19.655 billion by week ended August 13, 2020, State Bank of Pakistan (SBP) said.

    The foreign exchange reserves of the country were at $19.518 billion by week ended August 07, 2020.

    The foreign exchange reserves held by the central bank also increased by $139 million to $12.608 billion by week ended August 13, 2020 as compared with $12.469 billion a week ago.

    The SBP attributed the increase in reserves to proceeds of $249.4 million from Asian Infrastructure Investment Bank (AIIB). Meanwhile, during the week, SBP also made government external debt repayments of $151.0 million.

    The foreign exchange reserves held by commercial banks slightly down by $2 million to $7.047 billion by week ended August 13, 2020 as compared with $7.049 billion a week ago.

  • SBP allows extension in foreign currency loan settlement

    SBP allows extension in foreign currency loan settlement

    KARACHI: State Bank of Pakistan (SBP) has allowed extension in settlement of foreign currency loans to facilitate exporters and importers in wake of coronavirus pandemic.

    In a statement issued on Thursday, the SBP said that continuing with its commitment to support the industry amid COVID-19 pandemic, the central bank further facilitated the exporters and importers by allowing extension up to 180 days in settlement of their export and import loans under FE-25 Scheme.

    Banks can now allow extension up to 180 days to exporters in settlement of their FE-25 loans in case they are facing delay in realization of export proceeds due to COVID-19.

    Moreover, banks can also allow settlement of FE-25 loans to exporters through substitute contract during the extended period of 180 days where the original export contract has been cancelled due to COVID-19.

    Likewise, SBP has also allowed the bank to extend the maturity of FE-25 import loans by 180 days.

    This facilitation has been provided to exporter and importers for their foreign currency loans maturing up to September 30, 2020.

    State Bank reiterates its unflinching resolve to continue working with all stakeholders to provide all needed facilitation in these uncertain times in the larger interest of people of Pakistan.

  • Rupee ends down by 12 paisas on import payment demand

    Rupee ends down by 12 paisas on import payment demand

    KARACHI: The Pak Rupee ended down by 12 paisas against dollar on Thursday owing to persistent demand for import and corporate payments.

    The rupee ended Rs168.38 to the dollar from previous day’s closing of Rs168.26 in interbank foreign exchange market.

    Currency experts said that the rising economic activities after ease in lockdown had increased the demand for imported goods/raw materials.

    The experts however said that the improved trend in export receipts and workers remittance may help the local currency to rebound in coming days.

    The inflow of workers’ remittances hit monthly record high of $2.77 billion in July 2020.

    In July, workers’ remittances rose to US $ 2.768 billion. “This is the highest ever level of remittances in a single month in Pakistan,” according to the SBP.

    In terms of growth, remittances increased by 36.5 percent over July 2019 (y/y) and 12.2 percent over June 2020 (m/m). Given the impact of Covid-19 globally, this increase in worker’s remittances is encouraging.

  • SBP allocates additional Rs190 billion refinancing to facilitate exporters

    SBP allocates additional Rs190 billion refinancing to facilitate exporters

    KARACHI: The State Bank of Pakistan (SBP) has allocated an additional amount of Rs190 billion under refinancing schemes for exporters during fiscal year 2020/2021, a statement said on Wednesday.

    In order to further facilitate the exporters, SBP enhanced the limit of refinancing provided to the banks under Exports Finance Scheme (EFS) by Rs100 billion.

    Hence, banks will now have overall limits of Rs700 billion for the exporters for 2020/2021.

    Moreover, to promote export-oriented investment, Rs90 billion have also been allocated under Long Term Financing Facility (LTFF) for the FY 21.

    This amount is in addition to limit of Rs100 billion already allocated to banks/DFIs under Temporary Economic Relief Facility (TERF) – a concessionary refinance scheme for setting up of industrial units, the SBP said.

    Export Finance Scheme and Long Term Financing Facility are two of the oldest schemes of SBP under which concessionary financing is provided to the exporters.

    EFS is operational since 1973 to meet short-term financing needs of exporters, while LTFF has been available 2008. For both the schemes, their Shariah compliant versions are also available.

    Since the emergence of Covid-19, SBP has taken several measures to counter its impact on the economy and safeguarding country’s exports has been a key priority. SBP has provided a number of relaxations under EFS and LTFF since March 2020 including:

    Additional period of six months for making shipment against loans availed under EFS Part-I.

    Additional period of six months for meeting required export performance against loans availed under EFS Part-II.

    The export performance of this extended period will also be considered for calculating the entitlement limit for 2020/2021.

    Reduction in showing export performance from 2 times to 1.5 times against financing availed during FY20 and FY21.

    Relaxation in the eligibility criteria for availing finance under LTFF.

    Allowing deferment of principal amount for one year and/or rescheduling/restructuring of loans under LTFF.

    It is expected that with the above already provided relaxations, which were widely appreciated by business community; above enhancement of around Rs190 billion in limits will cater to exporters’ cheaper liquidity requirement. SBP is closely monitoring the situation and is ready to take any further actions required to support the export sector.

  • Rupee eases by 7 paisas against dollar

    Rupee eases by 7 paisas against dollar

    KARACHI: The Pak Rupee ended down by 7 paisas against dollar on Wednesday owing to demand for import and corporate payments.

    The rupee ended Rs168.26 to the dollar from previous day’s closing of Rs168.19 in interbank foreign exchange market.

    Currency experts said that the demand of the foreign currency for import and corporate payments resulted in depreciation of the local unit.

    The experts hoped that the local currency would rebound in coming days owing to significant inflows of export and remittances.

    The inflow of workers’ remittances hit monthly record high of $2.77 billion in July 2020.

    In July, workers’ remittances rose to US $ 2.768 billion. “This is the highest ever level of remittances in a single month in Pakistan,” according to the SBP.

    In terms of growth, remittances increased by 36.5 percent over July 2019 (y/y) and 12.2 percent over June 2020 (m/m). Given the impact of Covid-19 globally, this increase in worker’s remittances is encouraging.

  • Govt. to generate funds by issuing new Sukuk

    Govt. to generate funds by issuing new Sukuk

    KARACHI: The government has decided to generate funds through Islamic mode by reopening of Sukuk and in this regard the State Bank of Pakistan (SBP) on Tuesday issued necessary instructions and guidelines.

    The SBP said that subsequent to the issuance of first Ijarah Sukuk issue if the government is in need of additional funds and instead of issuance of a new Sukuk wishes to raise new funds by way of re-opening, then the State Bank of Pakistan will conduct an auction for reopening of the existing Sukuk Issue.

    In the Islamic context the steps of reopening of existing Sukuk is similar as that of issuance of a completely new Sukuk i.e. at the time of reopening of Sukuk the transaction is concluded by purchasing additional share in the identified asset on Musha basis which is then given on rent/ Ijarah and a separate Ijarah Agreement is executed.

    However, since the underlying asset, maturity date, rental rate and rental payout frequency is kept same as the initial issue, therefore the new issue would be called re-opening of Sukuk instead of a new Sukuk issuance.

    The transaction flow for the re-opening of Sukuk would be same as that of an approved structure of the fresh Issue which is re-defined briefly in the following few lines:

    At the time of reopening of Sukuk, a fresh Purchase Agreement would be executed between Pakistan Domestic Sukuk Company Limited (PDSCL) (on behalf of Investors) and GOP at an agreed purchase price for the purchase of a new/additional share in the asset.

    Subsequently PDSCL (on behalf of Investors) and GoP would enter into an Ijarah Agreement wherein the new / additional assets would be leased to GoP for a fixed period which would be ending on the scheduled maturity date of the first issue.

    The other agreements as mentioned in the Shariah Structure of first issue would also be executed simultaneously.

    However, the structure of reopening of Sukuk might differ from the structure of the first issue in ways as elaborated below.

    The distinguishing features of the re-opening structure are as follows:

    • For the first rental period the rental amount of the reopened Sukuk in absolute terms would be the same as the first issue. However, for subsequent period, the Rental Rate for the reopened Sukuk would be same as that of the first issue. Similarly, the maturity of the re-opened Sukuk would also be same as the first issue

    • For the determination of the Bid Price the Investors at the time of re-opening would take into consideration the known Rental Rate (in terms of benchmark), the remaining tenor of the issue and the higher first rental amount. The Purchase Price (at which settlement will take place) would have the following three components which can be referred to individually or collectively for the reporting purpose:

    i. Face value of Sukuk

    ii. Market premium/ discount

    iii. Price premium due to higher first rental

    The component (iii) mentioned above is based on the rental rate determined in the fresh auction and/or start of last rental period; hence will be known to the investor.

    The investors would bid in the auction on the price for re-opening of the Sukuk, which may be at premium or discount based on market conditions, considering component (i) and (ii) mentioned above.

    The component (iii) will be added to the Cut-off Bid Price (as per auction result) for determining purchase price at which settlement will take place.

    • On completion of the bidding, the Purchase Agreement for the purchase of new/additional asset between PDSCL (on behalf of the Investors) and GoP would be executed at purchase price.

    • The Sukuk would be recorded in the books of accounts at Absolute Auction Price i.e. the purchase price without any adjustment. ‘However, for reporting purpose the above identified 3 components of the Purchase Price may be recorded separately or collectively as required.

    • In case the date of Ijarah Agreement lies in between the two rental payment dates of the original issue, then the first rental period would be of a period less than 6 months. In this case the first rental amount for the reopened sukuk would be communicated to the lessee in absolute terms. This rental amount would be equal in absolute terms with the corresponding 6-month rental of the first/ previous issue.

    • The full amount of first rental of the re-opened sukuk would be booked as rental income by the Investors without adjustment.

    • On the expiry of the first lease period subsequent to re-opening of Sukuk an Asset Comingling Declaration’ shall be executed by PDSCL (as trustee and agent of investors) on the last day of first rental period to inform GoP about the combined proportionate share of investors in the underlying asset.

    • Subsequently, a single rental notice referring to Comingled Assets shall be executed for subsequent lease periods.

  • Women entrepreneurs to get loan up to Rs5 million: SBP

    Women entrepreneurs to get loan up to Rs5 million: SBP

    KARACHI: The State Bank of Pakistan (SBP) has decided to enhance the limit of loan for women entrepreneurs up to Rs5 million from Rs1.5 million in order to encourage women participation in the economy.

    In a statement issued on Tuesday the central bank said that it had enhanced the financing limit under its Refinance and Credit Guarantee Scheme for Women Entrepreneurs from Rs1.5 million to Rs5 million.

    The decision has been taken in light of feedback received from various stakeholders about current financing limit being insufficient to cover the financing needs of women entrepreneurs, the SBP said.

    This decision is in line with the government policy to support and revive economic activities in the country and SBP’s key objective of improving access to finance for priority segments including women entrepreneurs.

    Initially in August 2017, State Bank had introduced Refinance and Credit Guarantee Scheme for Women Entrepreneurs in underserved areas to promote financial inclusion and access to finance for women entrepreneurs in the country.

    Subsequently, the scope of scheme was enhanced to cover whole of Pakistan.

    Under this scheme, SBP provides refinance to participating financial institutions at 0 percent on their financing to women entrepreneurs at maximum end user rate of 5 percent. Moreover, 60 percent risk coverage is also available to the participating institutions.

    The enhancement in financing limit under SBP scheme is expected to increase financial inclusion of women since more women entrepreneurs are likely to be attracted for setting up of new businesses or for expanding the scope of their existing businesses by availing concessional financing under SBP scheme.