Karachi, January 29, 2024 – In a move aligning with global trends, the State Bank of Pakistan (SBP) has decided to introduce a new series of currency notes, boasting enhanced security features.
The decision was communicated by Topline Securities Limited, shedding light on the central bank’s intentions after the Monetary Policy announcement on Monday.
The upcoming banknotes will not only incorporate advanced security measures but will also feature new designs. The process of implementation will begin with obtaining approval from the board, followed by seeking approval from the cabinet, as disclosed by Topline Securities quoting the SBP.
The analysts at Topline Securities noted that the monetary policy decision remained in line with market expectations. During the Monetary Policy Committee (MPC) meeting, the SBP decided to maintain the policy rate at 22%, conforming to the predictions of 68% of market participants in a poll conducted by Topline Research. The remaining 32% had anticipated a rate cut, reflecting a similar trend in polls conducted by other entities.
The rationale behind maintaining the policy rate stemmed from the observation that frequent adjustments in administered energy prices had impeded the anticipated decline in inflation. The MPC acknowledged that non-energy inflation was moderating, consistent with the committee’s expectations.
Inflation estimates were revised upward, with the MPC expecting an average inflation rate in the range of 23-25% for FY24, compared to the earlier estimate of 20-22%. The committee highlighted the significant positivity of the real interest rate on a 12-month forward-looking basis, as inflation is projected to continue decreasing.
The MPC, in its medium-term assessment, targeted an inflation range of 5-7% by September 2025, adjusting from the previous target set for June 2025. This revision factored in the recent and anticipated adjustments in administered energy prices.
Regarding GDP growth, the MPC maintained its projection, foreseeing growth in the range of 2-3% for FY24. The committee acknowledged three key developments since its December 2023 meeting, including improved foreign exchange reserves, on-track fiscal consolidation, and positive business sentiments. However, global geopolitical tensions in the Red Sea region were noted as potential risks for global trade and commodity prices.
The SBP assured that the stabilization policy was effective, anticipating a decline in inflation. The Governor emphasized that the government is in a better negotiating position compared to the time of the last Stand-By Agreement in June 2023 regarding a potential new IMF program. Additionally, the SBP highlighted positive trends in external financing, with expectations of a lower Current Account Deficit (CAD) in FY24.
Addressing pending dividend payments, the Governor informed that until September 2023, US$356 million was pending, out of which US$232 million constituted bank dividends. The remaining US$124 million was payable to corporates as of September 2023. The overall financial outlook, coupled with the introduction of new currency notes, points towards a strategic and cautious approach by Pakistan’s financial authorities in navigating the economic landscape.
