Tag: key policy rate

KARACHI: Pakistan has repaid an amount of $1.8 billion against foreign loans during November 2022, the central bank said in an analyst briefing on Friday.

According to Insight Securities (Pvt) Limited, commenting on foreign loan payment, SBP governor highlighted that during the month of November 2022, the central bank had repaid loan of $1.8 billion. While another amount of $1.08 billion will be paid on December 02, 2022.

READ MORE: State Bank stuns market with massive policy rate hike

The upcoming payment will be financed by inflows from World Bank, Asian Development Bank and Asian Infrastructure Investment Bank. Furthermore, governor commented that $500 million from AIIB is expected to hit central bank reserves on Tuesday.

Furthermore, Governor State Bank assured the market participants that the country will timely repay its debt payments and necessary inflows would be arranged from multilateral institutions along with certain rollovers.

READ MORE: SBP raises benchmark interest rate by 100 basis points to 16pc

In an unexpected move, the SBP on November 25, 2022 increased policy rate by 100 basis points to clock in at 16 per cent.

SBP highlighted that the inflationary pressures have become more persistent, as evident from rising core inflation. Therefore, to control the impact of persistent and sticky rise in price levels, SBP’s Monetary Policy Committee (MPC) decided to hike benchmark rate by 100bps.

After the assessment of floods, SBP expects GDP growth of 2 per cent in the fiscal year 2022-2023, while current account deficit is projected to clock in at 3 per cent of GDP.

READ MORE: SBP keeps policy rate unchanged at 15% amid economic deceleration

Due to strong rise in core inflation coupled with higher food prices, SBP has also revised its inflation projections of average inflation from 18-20 per cent to 21-23 per cent.

In real sector, major demand indicators have started to show moderation in first four months (July – October) 2022-2023, where sales of cement, petroleum products and automobiles have witnessed a slowdown. Similarly, electricity generation has witnessed a decline for the fifth consecutive month.

Furthermore, damages to crops amid recent floods will result in lower agri output, which is evident from decline in rice and cotton output. In addition, private sector credit has also shown moderation in the first quarter of the current fiscal year.

READ MORE: SBP keeps benchmark rate unchanged at 15% amid rising inflation

On external front, current account deficit has witnessed significant moderation in first four months of the fiscal year to clock in at $2.7 billion as compared to $5.3 billion in same period last year. The improvement is mainly attributable to reduction in imports, however, slowdown in export and remittances has nullified some of the benefits arising from lower imports.

The recent turmoil in domestic economy coupled with uncertain political environment has resulted in lower inflows from multilateral institutions and friendly countries, which was further dented by tight monetary stance adopted by major central banks of the world.

Inflation for the month of October 2022 clocked in at 26.56 per cent, primarily driven by adjustment in electricity tariff and higher food prices. Core inflation which tends to be stickier, has shown reasonable increase in few months due to 2nd round impact of higher energy prices. Therefore, SBP has revised its inflation forecast for the current fiscal year to 21-23 per cent, while its medium term inflation target still stands at 5-7 per cent for next fiscal year.

The MPC will continue to monitor inflation trajectory and will take necessary decisions.