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  • SBP issues instructions for reporting borrowers’ information

    SBP issues instructions for reporting borrowers’ information

    KARACHI: The State Bank of Pakistan on Thursday issued instructions for banks to ensure quality reporting regarding borrowers’ information.

    The SBP said the Credit Information Bureau (eCIB) of the central bank collects borrowers’ credit information and makes it available to financial institutions (FIs) for making informed credit decisions.

    The information in eCIB is also used by SBP for supervisory purposes.

    Accordingly, quality data reporting in eCIB remains a top priority for SBP.

    In this regard, the SBP, carried out an in-depth assessment of the mechanisms put in place for eCIB data feeding, compilation, validation and reporting by the member FIs.

    In light of the findings of this exercise, instructions have been developed to ensure quality data reporting in eCIB.
    All the member FIs are advised to ensure strict compliance with the enclosed “Instructions for Quality Data Reporting in eCIB” in letter and spirit to avoid any untoward business and legal implication of the incorrect data reporting in eCIB.

    Failure to comply with these instructions will attract strict penal actions against the concerned FIs under the relevant legal and regulatory provisions.

    The SBP said that despite the issuance of repeated instructions from time to time regarding the quality data reporting, still some inconsistencies in the eCIB reported data were witnessed.

    Such inaccuracies in data can result in adverse selection by the FIs such as the inadvertent refusal of credit application of a good borrower or extension of credit to a bad borrower. Besides, it may also expose the member FIs to legal and regulatory implications.

    Therefore, to ensure high-quality credit reporting of credit data, all the member FIs are advised to ensure that the financial and non-financial data should be:

    i. Accurate (i.e. correct, up-to-date, having strong validation process for identification of data subjects and other information as per prescribed data formats).

    ii. Sufficient, relevant, and collected on a systematic basis from all reliable, appropriate, and available sources.

    iii. Timely (updated on a continuous basis and reported to eCIB).

    iv. Retained safely for at least five years or otherwise specified in the relevant law/regulations issued by SBP from time to time.

  • Foreign exchange reserves ease to $20.058 billion

    Foreign exchange reserves ease to $20.058 billion

    KARACHI: The country’s foreign exchange reserves eased by $15 million to $20.058 billion by week ended February 12, 2021, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $20.073 billion by week ended February 04, 2021.

    The official foreign exchange reserves of the central bank fell by $60 million to $12.889 billion by week ended February 12, 2021 as compared with $12.949 billion a week ago.

    However, foreign exchange reserves held by the commercial banks increased by $45 million to $7.169 billion by week ended February 12, 2021 as compared with $7.124 billion a week ago.

  • SBP allows housing loan on personal guarantee

    SBP allows housing loan on personal guarantee

    KARACHI: The State Bank of Pakistan (SBP) on Monday eased condition for availing loan for housing loan by allowing personal guarantee.


    The SBP said that currently applicants face difficulties in obtaining housing finance, especially for low cost housing, as banks are reluctant to take the risk of the house not being completed or documentation completion.


    The completion of housing unit and mortgage creation takes time. In order to address this issue for applicants and banks, the SBP has allowed acceptance of a third party guarantee for this period up to a maximum of one year. 


    With the aim to facilitate the banks in extending low cost housing finance, SBP has allowed them to accept personal guarantee of third party until the housing unit is completed and the mortgage is perfected.


    The guarantee will remain valid for a maximum period of one year. This step will help promote home ownership of potential borrowers wishing to avail housing finance under Government Markup Subsidy Scheme issued by State Bank of Pakistan on October 12, 2020. 


    Third party guarantee will cover the period from the disbursement of loan to the time when construction is completed and risk coverage becomes available by Pakistan Mortgage Refinance Company. Acceptance of third party personal guarantee will provide additional comfort to banks for extending low cost housing finance, an area in which banks have keen interest for its business potential.


    It is expected that with this move, banks will increase their efforts to ensure that the benefits of the markup subsidy scheme reach marginalized segments of the society who currently do not own a house.

  • Workers remittances grow by 24 percent in seven months

    Workers remittances grow by 24 percent in seven months

    KARACHI: The remittances sent by the overseas Pakistani workers posted 24 percent growth during the first seven months of the current fiscal year as the inflows of remittances exceeded over $2 billion for eight consecutive months, State Bank of Pakistan (SBP) said on Monday.

    The overseas Pakistani workers have sent $16.47 billion during July – January of fiscal year 2020/2021 as compared with $13.28 billion in the corresponding period of the last fiscal year.

    The SBP said that workers’ remittances had exceeded $2 billion for the eighth consecutive months in January 2021.

    The inflows of workers remittances posted growth of 19.50 percent to $2.27 billion in January 2021 as compared with $1.9 billion in the same month of the last year. However, remittances were lower from the December 2020 level of $2.4 billion.

    A large part of workers’ remittances during July-January 2020/2021 was sourced from Saudi Arabia ($4.5 billion), United Arab Emirates ($3.4 billion), United Kingdom ($2.2 billion) and United States ($1.4 billion).

    This sustained increase in workers’ remittances largely reflects growing use of banking channels that is attributed to continuous efforts by the government and SBP to attract inflows through official channels, limited cross border travel amid the second wave of COVID-19 and flexible exchange rate regime.

  • SBP urged to extend refinance scheme for salary payments

    SBP urged to extend refinance scheme for salary payments

    KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday urged the central bank to extend the refinance scheme which was introduced for businesses in order to reduce the adverse impact of coronavirus pandemic.

    The FPCCI said that the State Bank of Pakistan (SBP) should extend the refinance scheme by one year for payment of wages and salaries, launched to support employees and prevent layoffs due to the COVID-19 outbreak in Pakistan.

    FPCCI President Mian Nasser Hyatt Maggo appreciated the initiative of SBP; introducing schemes like salary payments, deferred loans, introduction of temporary economic refinance facilities etc. to resolve the cash flow problems of businessmen and industrialists.

    He added that these schemes helped many industrial and service oriented sectors to retain employees during the Corona pandemic period. Under this scheme, SBP has released Rs. 238 billion to the private sector.

    While commenting on the refinance scheme for payment of wages and salaries, the FPCCI chief said that the aim of this scheme is to prevent layoff by financing wages and salaries of employees (permanent, contractual, daily wagers as well as outsourced) for all kind of businesses except for the government entities, public sector enterprises, autonomous bodies and deposit taking financial institutions.

    Since the companies that availed this credit facility through banks have not been recovered from the devastating economic impact of COVID-19, it would be advisable if SBP extend this scheme for more one year.

  • Weekly foreign exchange reserves slip by $90 million

    Weekly foreign exchange reserves slip by $90 million

    KARACHI: Foreign exchange reserves position eased by $90 million to $20.073 billion by week ended February 04, 2021, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $20.163 billion by week ended January 29, 2021.

    The official foreign exchange reserves of the central bank also fell by $82 million to $12.949 billion by week ended February 04, 2021 as compared with $13.031 billion a week ago.

    Similarly, the foreign exchange reserves held by commercial banks witnessed decline by $8 million to $7.124 billion by week ended February 04, 2021 as compared with $7.132 billion a week ago.

  • SBP allows investment abroad by resident individuals, companies

    SBP allows investment abroad by resident individuals, companies

    KARACHI: The State Bank of Pakistan (SBP) on Wednesday allowed resident Pakistani individuals and companies to make equity-based investment in entities abroad on repatriable basis.

    The central bank issued FE Circular No. 01 dated February 10, 2021 under which the residents of Pakistan including firms and companies are allowed to make equity-based investment in entities abroad on repatriable basis, subject to the following terms and conditions and in the manner stipulated below:

    I. Basic Terms and Conditions:

    Following basic terms and conditions will apply to all categories of investment abroad:

    1. Investment abroad is allowed only for those countries that allow repatriation of profits, dividends and capital. However, equity investment in India, shall be subject to prior approval of SBP.

    2. The funds proposed for investment should be legitimate and tax paid, and the investor should have a clean record of loan repayments.

    3. No ML and TF related investigation is pending against the applicant or its beneficial owner/key management personnel under Anti Money Laundering Act, 2010 or Anti-Terrorism Act, 1997 as amended from time to time.

    II. Category-wise specific Terms and Conditions:

    Following terms and conditions will apply specifically to each category of Investment abroad:

    A- Establishment of subsidiary/branch office abroad by export oriented companies/firms for promoting exports:

    a. In order to facilitate the companies/firms incorporated/registered in Pakistan, in increasing exports of the country by expanding their business offshore, designated Authorized Dealers are granted general permission to allow the following equity investment abroad transactions:

    i Establishment/acquisition of subsidiary and additional capital injection in subsidiary.

    ii. Establishment/acquisition of marketing/ liaison/ representative office abroad and remittance of their annual budgeted operational expenses.

    b. However, this general permission is subject to following terms and conditions:

    i. Total amount of remittance during a calendar year, under this general permission, should not exceed the 10% of average annual export earnings of last three calendar years of the applicant, or USD 100,000 whichever is higher. Authorized dealer can also open standby letter of credit to facilitate the offshore entity of the applicant for raising funds from offshore jurisdiction, within this limit.

    ii. At any point of time, investment abroad of the applicant should not exceed 80% of its equity (after adjusting for investments in subsidiaries/ associates, goodwill, Deferred Tax Assets, receivables from related entities etc.).

    iii. Transactions shall be carried out by the exporter by utilizing foreign currency funds available to the credit of special foreign currency accounts maintained in terms of applicable Foreign Exchange Regulations. However, if the balance available in its special foreign currency accounts is not sufficient, remittance of balance amount can be allowed from interbank market.

    iv. The export overdue of intending investor shall not be more than 1% of the previous year’s exports.

    v. The threshold of up to USD 30,000 shall be observed for allowing annual budgeted operational expenses of a marketing/ liaison/ representative office from second year onward (from date of investment). However, an increase of up to 10% may be allowed in annual budgeted operational expenses in the following years subject to valid justification of increase in expenses by the applicant.

    vi. One entity per jurisdiction shall be allowed for establishment/ acquisition of subsidiary/ marketing/ liaison/ representative office abroad.

    vii. The designated Authorized dealer shall ensure the following through assessment of relevant information/documents submitted by the applicant, before allowing the transaction under this general permission:

    a. In case applicant’s export earnings during last three calendar years is less than USD 300,000 or equivalent in other currencies, the Authorized dealer shall obtain details of products to be exported by the applicant and an undertaking that proposed investment has the potential to increase the exports of Pakistan.

    b. The business activity of the company, firm in which investment is desired to be made should ordinarily be of the same nature as that in which the applicant is already engaged in Pakistan. Proposal for investment abroad in the extended line of business or vertical business integration shall also be considered as similar line of business.

    c. The investor should be financially sound as shown by its audited accounts for the last three years. In the case of a company in the I.T. business, the condition of three years may be reduced to one year.

    d. The bonafides of the applicant and the genuineness of the transaction by verifying the necessary documents.

    e. In case of acquisition of subsidiary abroad, the Authorized Dealer shall allow the transaction after satisfying itself with respect to valuation of the company being acquired. In case the target company is unlisted, and the amount of investment is above USD 1 million, the Authorized dealer may allow the transaction after satisfying itself through a valuation report from an accredited business valuation firm of the country in which investment is to be made.

    f. While assessing any request for establishment/acquisition of subsidiary or marketing/ liaison/ representative office abroad, due weightage shall be given to the performance of previous investments abroad, if any, in terms of profit repatriation, increase in exports etc.

    g. In case of additional capital injection in subsidiary, due weightage shall be given to its previous performance as well as future outlook.

    B- Establishment of Holding Company (HoldCo) abroad by residents for raising capital from abroad:

    a. In order to facilitate the resident companies (hereinafter referred as Operating Company or “OpCo”), having innovative and/or scalable businesses with a potential for high growth, to raise capital from abroad, following general permissions are granted:

    i OpCo is allowed to incorporate a holding company (hereinafter referred as “HoldCo”) abroad. For this purpose, designated Authorized dealers are allowed to remit the initial incorporation expenses, on actual basis but not exceeding USD 10,000 or equivalent in other currencies, subject to condition that the applicant company is eligible as per terms and conditions.

    ii After incorporation of the HoldCo abroad, the existing shareholders (individuals/ companies/ firms) of OpCo (“Founders”) are once allowed to swap their shares, of equal value, to mirror the shareholding of OpCo in HoldCo, within 30 days, by acquiring shares of HoldCo against transfer of their shareholding in OpCo to the nonresident HoldCo on repatriation basis. However, no remittance in this regard shall be allowed from Pakistan.

    iii Subsequently, resident companies/firms and Founders are allowed to acquire the shares issued by HoldCo against payment of funds to OpCo locally in PKR. Consequently, the OpCo can issue shares of equal value in favor of non-resident HoldCo, on repatriation basis.

    b. These general permissions are subject to following terms and conditions:

    1. The company shall be eligible for incorporation of holding company abroad under this

    general permission, provided that:

    i. The company is incorporated as a private limited/public unlisted company under the Companies Act, 2017 (erstwhile Companies Ordinance 1984) for not more than 7 years, provided that such entity is not formed by splitting up, or reconstruction of a business already in existence

    ii. The Company has annual revenue below PKR 2 billion since its incorporation

    iii. The company has equity (including retained earnings) below PKR 300 million as per latest audited financials

    2. HoldCo shall repatriate the funds, raised from abroad, through equity or borrowing, to Pakistan, as equity based investment in OpCo, in following manner:

    i. At least 80% of the funds raised from abroad on annual basis until USD 1 million (net of dividend remitted by OpCo) is remitted to Pakistan.

    ii. Subsequently, at least 50% of funds raised from abroad on annual basis until USD 10 million (net of dividend remitted by OpCo) is remitted to Pakistan on cumulative basis.

    3. The OpCo can issue shares in favor of HoldCo, against the amount received from abroad, on repatriation basis in terms of provisions of para 6 and 7 of Chapter 20 of Foreign Exchange Manual. The OpCo shall report to SBP within 30 days of issuance of shares through its designated Authorized dealer, along with details of funds raised by HoldCo.

    4. HoldCo shall remit the dividends to Pakistan against shares acquired by resident companies/firms and Founders.

    5. Designated Authorized Dealer shall arrange to ensure the compliance of all terms and conditions.

    C- Investment abroad by resident companies/firms for expansion of business:

    The residents of Pakistan including firms and companies are allowed to make equity based investment (other than portfolio investment) in entities abroad on repatriable basis, with prior permission of State Bank of Pakistan and subject to the following terms and conditions:

    i. Only companies incorporated in Pakistan including foreign controlled companies and firms owned by Pakistani Nationals resident in Pakistan are allowed investment under this category.

    ii. The business activity of the company, firm, joint venture in which investment is desired to be made should ordinarily be of the same nature as that in which the investor is already engaged in Pakistan, or in which the investor has the potential to acquire sufficient expertise from the market for running the business. Proposal for investment abroad in the extended line of business or vertical business integration shall also be considered as similar line of business.

    iii. The investor should be financially sound as shown by its audited accounts for the last three years. In the case of a company in the I.T. business, however, the condition of three years may be reduced to one year.

    iv. The proposal should be economically viable as evidenced from a feasibility report. It should have the potential for future earnings of foreign exchange coupled with other advantages to the country such as employment opportunities for Pakistani nationals and improvement in national human resources.

    v. Funding for the proposed investment abroad shall be allowed from the foreign currency funds available to the credit of special foreign currency accounts maintained by the applicant in terms of applicable Foreign Exchange Regulations. However, in case the applicant does not have any such account or the balance available in its special foreign currency accounts is not sufficient, remittance can be allowed from interbank market.

    vi. The State Bank under the aforesaid guideline would also deal with the proposals emanating from the Public Sector Organizations providing financial services whereas the concerned ministry would deal with the investment proposals from all other public sector organizations.

    D- Investment abroad by Resident Individuals:

    1. Small Investment by Individuals in Listed companies abroad:

    General permission is granted to Designated Authorized Dealers to effect remittance on behalf of resident individuals for investments in shares of listed companies abroad, subject to following terms and conditions:

    i. Designated Authorized Dealer is allowed to remit a maximum amount of USD 25,000 or equivalent during a calendar year, under this general permission, on behalf of a resident individual.

    ii. The maximum shareholding by an individual, in a single investee company, under this general permission, shall not exceed 1% of shares of the investee company at any time.

    2. Employee Stock Option Plans

    General Permission is granted to Designated Authorized Dealers to effect remittance on behalf of resident employees of subsidiaries of foreign companies in Pakistan to participate in their share option plans, subject to following terms and conditions:

    i. Subsidiaries of foreign companies in Pakistan shall approach to their designated Authorized Dealer with complete share option plans.

    ii. Designated Authorized Dealer is allowed to remit a maximum amount of USD 50,000 or equivalent during a calendar year, under this general permission, on behalf of a resident individual.

    iii. The maximum stake by an individual, in a single investee company, under this general permission, shall not exceed 3% of shares of the investee company at any time.

    3. Sweat Equity

    General permission is granted to resident individuals to acquire the shares of companies abroad issued to them as sweat equity against their efforts and services, without any monetary consideration. This general permission is subject to the following terms and conditions:

    i. The maximum shareholding, under this general permission, shall not exceed 20% of shares of the investee company at any time.

    ii. The investor could acquire shares under this general permission against its efforts and services related to the field where the investor has expertise.

    iii. The investor shall submit the agreement, confirming this arrangement, to SBP through its designated Authorized Dealer while reporting this investment, along with its detailed profile showing his/her filed field of expertise with documentary evidences.

    III. Post investment requirements:

    After making investment, in terms of these regulations, the investor is required to:

    i. Submit the documentary evidences related to establishment/ acquisition of subsidiary/ branch office/shares abroad, within one month of making the investment, through designated authorized dealer.

    ii. Make a return to State Bank on the prescribed form V-100 through their banker within one month of making the investment;

    iii. Each entity who invested abroad under this policy shall submit audited financials of the investee company to the Authorized Dealer on annual basis.

    iv. Repatriate the dividend/disinvestments proceeds (including capital gains) to Pakistan through normal banking channels. The amounts so received would be converted to local currency by the bank concerned and a Proceeds Realization Certificate in original evidencing the same shall be filed by the owner with the State Bank through its Authorized Dealer. Such amounts shall not be allowed for credit to a Foreign Currency Account or for purchase of Pakistani securities on Repatriable basis.

    IV. Designation and application processing:

    1. Designation of Authorized Dealer

    i. All the Investments under the general permission granted for categories of investment abroad mentioned at Para 13(II) A, B & D above, shall be routed through only one branch of an Authorized Dealer to be designated by the applicant. For this purpose, request for designation shall be submitted by the applicant through the Authorized Dealer, intended to be designated, to the Exchange Policy Department of State Bank of Pakistan, for acknowledgement. The request for designation of the branch shall be routed through the Head Office of the Authorized Dealer, where record of all such designations shall be maintained.

    ii. The Authorized Dealer at its relevant branch so designated by the applicant shall be liable to ensure compliance of terms and condition stipulated for each category of investment abroad and maintain complete party wise record of transactions processed by it. The Authorized Dealer shall also maintain at the designated branch the complete record of repatriation of dividend/disinvestment proceeds from investments abroad by its each customer.

    iii. In case applicant desires to change the designated bank/branch, it shall submit an application through the Head Office of bank/branch desired to be designated for the acknowledgment of Exchange Policy Department along with the following :

    a) NOC from previous designated bank/branch regarding change of designation. The previous designated Authorized Dealer shall be required to issue the NOC and share the record related to investment abroad transactions of the applicant with the new Authorized Dealer, within three working days from the date of request received from the new Authorized Dealer.

    b) Confirmation from bank/branch to be designated regarding acquisition of compete record, regarding previous investment abroad transactions, from bank/branch designated previously.

    2. Processing of application by Authorized Dealer

    The detailed applications along with audited accounts, particulars of Directors/Partners of the investor company/firm (not required in case of individuals), name and address of the foreign company/firm in which investment is desired to be made, its line of business and particulars of its Directors/Partners, shall be forwarded to the Authorized Dealer. The applications with respect to proposals of investment abroad pertaining to Para 13(II) A, B & D above, shall be processed by the designated Authorized Dealer. In case of any exemption/waiver is required, the application will be forwarded by the designated Authorized Dealer to Exchange Policy Department, State Bank of Pakistan as per procedure detailed below. With respect to proposals of investment abroad pertaining to Para 13(II) C above, applications shall be forwarded by the Authorized Dealer to State Bank of Pakistan as per procedure detailed below.

    3. Processing of application by State Bank of Pakistan

    The detailed applications with respect to Para 13(II) C or any exemption/waiver from Para 13(II) A, B & D shall be forwarded by Authorized Dealers to Director, Exchange Policy Department, State Bank of Pakistan, Karachi, along with its review of the application (against applicable terms and conditions) and specific recommendations. Any application submitted to State Bank without proper review and specific recommendation of the Authorized Dealer would not be entertained.

  • State Bank modernizes forex rules to facilitate startups, fintechs

    State Bank modernizes forex rules to facilitate startups, fintechs

    KARACHI: State Bank of Pakistan (SBP) has modernized foreign exchange regulations to facilitate startups, Fintechs and exports, a statement said on Wednesday.

    The central bank notified revisions in chapter 20 of the Foreign Exchange Manual to facilitate Start-ups, Fintechs and Exports.

    The new policy for equity investment abroad will attract foreign direct investment through the establishment of holding companies by Pakistani fintechs and startups; support exports by facilitating exporters to establish subsidiaries or branch offices outside Pakistan; and, allow resident Pakistanis to acquire sweat equity, amongst other changes to the Foreign Exchange (FX) regulations.

    Further changes in the foreign exchange regulations will facilitate portfolio investment in the country including mutual funds, Exchange Traded Funds (ETF) and Real Estate Investment Trust (REIT) Funds through Pak rupee based Roshan Digital Account (RDA) and Special Convertible Rupee Account (SCRA).

    The SBP, after approval of the federal government, has introduced three new categories of investment abroad under its revised policy governing equity investment abroad and banks have been authorized to allow remittances under newly introduced categories.

    i. Establishment of Holding Company abroad by residents for raising capital from abroad: Pakistan’s investment regime is quite liberal that allows full freedom to repatriate profit, dividend and capital; however, some international investors prefer to invest indirectly through holding company established abroad specially in the Fintech and Startup firms. SBP’s revised policy will enable the Pakistani Fintech and startup companies to channelize foreign direct investment in the country by establishing a holding company abroad against remittance of up to USD 10,000 and subsequent swapping of shares to mirror the shareholding of local company in the holding company.

    ii. Establishment of subsidiary/branch office abroad by export oriented companies/ firms for promoting exports: The policy will enable the export oriented companies to establish subsidiary/ branch office abroad against remittance of 10% of their average annual export earnings of last three calendar years, or USD 100,000 whichever is higher. This will facilitate exploring new and non-traditional markets and capturing more export orders, as international buyers prefer dealing with subsidiaries/ representative offices of foreign companies present in their country. Accordingly, the proposed policy would help in growth of export-oriented companies and boost the exports of the country.

    iii. Investment abroad by Resident Individuals: The policy will allow the resident Individuals of Pakistan to acquire equity stake in international firms through share option plans or investment in listed securities subject to observance of annual ceiling of foreign exchange defined in the policy. In case of sweat equity a person can acquire upto twenty percent shareholding in a foreign company. These policy provisions will provide opportunities to individuals to earn foreign exchange for the country in the form of repatriation of dividend/ capital gains to Pakistan.

    Investment in Mutual/Private Funds in Pakistan by Non-Residents:

    With an objective to attract investment in the country, SBP has allowed the trading of units of funds quoted at Stock Exchange, including Exchange Traded Funds (ETF), Real Estate Investment Trust (REIT) Funds and close-end mutual funds, through Special Convertible Rupee Accounts (SCRA) and PKR version of Roshan Digital Account (NRP Rupee Value Account (NRVA)). These account holders have also been allowed to invest in units of Mutual Funds registered as Open End Schemes (OES) under the management of Asset Management Companies (AMCs) licensed by SECP to provide asset management services.

    Further, SBP has also allowed the private funds established and operated by Private Fund Management Companies licensed by SECP to provide private equity and venture capital fund management services, to issue units of their funds to non-resident investors.

    It is expected that these changes will help the mutual fund and private equity fund industry to grow by attracting foreign investment in the country. It will also facilitate overseas Pakistanis with Pak Rupee based Roshan Digital Account (RDA) and the non-residents in general to invest in funds in Pakistan.

  • Government borrowing from commercial banks increases by 26pc in seven months

    Government borrowing from commercial banks increases by 26pc in seven months

    KARACHI: The government borrowing from commercial banks has sharply increased by 26 percent during first seven months of the current fiscal year mainly due to financing the ballooning budget deficit.

    The government borrowing from commercial banks increased to Rs906.54 billion during first seven months (July – January) of 2020/2021 as compared with Rs720.68 billion in the corresponding period of the last fiscal year, according to statistics released by the State Bank of Pakistan (SBP) on Tuesday.

    The federal government borrows from scheduled banks through fortnightly auctioning of Market Treasury Bills (MTBs) of 3-, 6- and 12-month maturities. The federal also borrows long-term by quarterly auctioning of Pakistan Investment Bonds (PIBs)/Sukuk of 3, 5, 10, 15, 20 and 30 years maturities.

    The budget deficit for the first half of the current fiscal year widened to 2.5 percent of the GDP as the budget deficit was 2.3 percent in the same half of the last fiscal year, according to fiscal operation for first half of the fiscal year 2020/2021 issued by the finance ministry.

    The government financed the budget deficit with the domestic borrowing to the tune of Rs683.48 billion during the first half of the current fiscal year. Likewise, the government borrowing was Rs481.13 billion in the same half of the last fiscal year.

    Since there is restriction of borrowing from State Bank of Pakistan (SBP) the government is heavily dependent on commercial banks. During the period the government retired borrowing from SBP to the tune of Rs317.7 billion as against the retirement of Rs266 billion in the same period of the last fiscal year.

  • Banking system witnesses Rs790 billion withdrawal in January

    Banking system witnesses Rs790 billion withdrawal in January

    KARACHI: A withdrawal of Rs790 billion has been seen from the banking system during January 2021 owing to higher demand following acceleration in the economy on ease in coronavirus related restrictions, experts said.

    The total deposits of the banking system fell to Rs17,086 billion by end of January 2021 as compared with record high of Rs17,876 billion by December 2020, according to statistics released by State Bank of Pakistan (SBP) on Monday.

    Experts said that the rate of COVID infections had decreased significantly over the last one month and it returned normalcy in business and commercial activities.

    The government also eased the restrictions that were imposed on high number of cases in second phase of the COVID during December 2020.

    The experts attributed the record high banking deposits in December 2020 to financial closing of banks, which made all efforts to show maximum amount of deposits to improve their balance sheet.

    This was reason of large withdrawal from the banking system in the month of January 2021, they added.

    However, the deposits by end of January 2021 at Rs17,086 billion is still 16.5 percent higher when compared with deposits of Rs14,673 billion in same month of the last year.