KARACHI: The State Bank of Pakistan (SBP) incurred a net exchange loss of Rs506.13 billion during fiscal year 2018/2019 as against exchange loss of Rs72.28 billion during the preceding fiscal year, according to annual financial statement of the central bank released on Wednesday.
The central bank said that the exchange gains/ (losses) arise on FCY assets and liabilities of the bank.
Major part of the foreign currency assets of the Bank are USD denominated whereas the foreign currency liability exposure is mainly SDR and USD denominated.
Accordingly, the movement in the PKR/ SDR and PKR/USD exchange rates directly affects the exchange account.
The bank incurred a net exchange loss of Rs 506,131 million during FY19 as against exchange loss of Rs 72,280 million during FY18.
The PKR depreciated against USD by Rs 38.56 and Special Drawing Rights (SDR) by Rs 80.82; accordingly, the net exchange loss increased significantly during the year.
Due to significant exchange losses, the SBP incurred net loss of Rs 1,043 million (consolidated) in the FY 19 as compared to a profit of Rs175,673 million in the FY 18.
The decline is primarily attributed to exchange loss of Rs 506,131 million during the current year as compared to exchange loss of Rs 72,280 million in previous year.
The SBP said that the decrease was, however, partly offset by increase of Rs 254,351 million in the net interest income.
The lending to the Federal Government remained the major source of SBP’s profit followed by earnings on the Open Market Operation (OMO) injections.
These major income streams are offset by the increase in interest expense on liquidity mop-up from domestic financial market and increase in interest expense on international deposits.
The expenses also witnessed a growth of 5 percent during the year. The note printing charges and General administrative and other expenses are the major expense heads that witnessed growth while agency commission paid to agent commercial banks for undertaking government banking business on behalf of the Bank witnessed slight decrease during the year.
The interest / markup income of the central bank increased by Rs 331,471 million to Rs 646,009 million, registering an increase of over 105 percent.
The borrowings by the Government from SBP during FY19 remained the major sources of income of the Bank during the year. The discount/interest income earned on lending to the Federal Government increased by 171 percent due to increase in volume of borrowing as well as increase in interest rate.
The interest earned on lending to commercial banks through OMO injections decreased by 41 percent due to smaller volumes of liquidity injections during the year.
The income on FCY assets registered 6 percent increase during the year. Although, foreign exchange reserves reduced significantly during the year; however, the return on the reserves increased due to hike in the international interest rates.
The interest earned on refinance facilities to priority sectors increased to Rs 11,945 million in FY19 from Rs 10,232 million in FY18 primarily due to increase in lending to banks under various refinance schemes.
The Bank incurred interest/ markup expense on FCY and domestic liabilities. FCY liabilities include deposits of international organizations and central banks, International Monetary Fund and currency swap arrangements.
The domestic interest/markup bearing liabilities include repurchase transactions and sukuks purchased under Baimuajjal agreement. The interest/ markup expense witnessed a rise of Rs 78,922 million primarily due to increase in expense on repurchase transactions by Rs 46,830 million.
Further, FCY deposits increased during the year which resulted in additional expense of Rs 23,141 million.