The State Bank of Pakistan (SBP) announced on Thursday that the country’s liquid foreign exchange reserves witnessed a significant boost, soaring by $278 million to reach $23.294 billion by the week ending May 28, 2021.
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SBP amends regulations to promote real estate sector
Karachi: In order to provide further support to the development of real estate sector, State Bank of Pakistan (SBP) has amended its capital adequacy regulations by significantly lowering the applicable risk weight (from 200% to 100%) on banks/ DFIs’ investments in the units of Real Estate Investment Trusts (REITs).
REITs are companies that raise funding from general public and institutions and deploy these
funds through investment in real estate properties.
With the aforesaid changes in capital adequacy regulations, banks/DFIs will now be able to increase their investments in REITs without the need to allocate relatively large amount of capital.This will, in turn help banks to promote development of real estate sector in the country.
The enhanced participation of financial institutions, backed by regulatory initiatives, would also encourage REIT Management Companies to launch new REITs, providing further boost to the Government’s agenda
for development of housing and construction sectors.
It may not be out of place to mention that SBP has been taking a number of regulatory steps to
enhance banks/DFIs’ participation in such sectors through their financing and investment activities, In line with Government of Pakistan’s various initiatives for the development of housing and construction sector.Earlier, SBP amended certain provisions of its existing Prudential Regulations for
Corporate & Commercial Banking to encourage enhanced participation and investment of banks/DFIs in the REITs that enabled banks/DFIs to make higher investments in REITs to the tune of 15% of their equity as against the previous limit of 10%.Moreover, SBP has allowed the banks to count their investments in shares/units/bonds/TFCs/Sukuks issued by REIT Management Companies towards
achievement of their mandatory targets for housing and construction finance.The amendments in SBP’s capital adequacy regulations will further incentivize banks to contribute towards a well-functioning capital market for real estate sector.
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Key policy rate kept unchanged at 7pc on improved GDP growth forecast
KARACHI: The Monetary Policy Committee (MPC) on Friday decided to keep the key policy rate unchanged at 7 percent owing to improved GDP growth forecast to 3.94 percent and hope of further higher growth in the next fiscal year.
A statement issued by the State Bank of Pakistan (SBP) said that since its last meeting in March, the MPC was encouraged by the further upward revision in the FY21 growth forecast to 3.94 percent.
The MPC noted that this confirms the strength of the broad-based economic rebound underway since the start of the fiscal year, on the back of targeted fiscal measures and aggressive monetary stimulus.
This positive momentum is expected to persist, translating into higher growth next year.
According to the SBP statement, the inflation rose to 11.1 percent (y/y) in April, propped up by the lingering impact of this February’s electricity tariff increase as well asa pick-up in month-on-month food prices, partly driven by the usual seasonality around Ramzan. The MPC noted that supply-shocks to food and energy still dominate, with a small number of energy and food items in the CPI basket accounting for about three-fourths of the rise in inflation since January.
The MPC also observed that although core inflation in urban areas has risen by around 1.5 percentage points during this period, available evidence suggests that demand-side pressures on inflation continue to be relatively contained.
This reflects the fact that despite the economic recovery, there is still some spare capacity following last year’s contraction. Second-round effects from the supply shocks are also not visibly apparent: price pressures are concentrated in a few items, wage growth is subdued keeping a cap on costs, and inflation expectations remain reasonably anchored. As previously forecast, the headline year-on-year inflation rate is likely to remain elevated in the coming months due to the recent electricity tariff hike, pushing the average for FY21 close to the upper end of the announced range of 7-9 percent. As supply shocks dissipate thereafter, inflation is expected to gradually fall toward the 5-7 percent target range over the medium-term.
In light of the foregoing considerations, the MPC was of the view that the current significantly accommodative stance of monetary policy remains appropriate to ensure the recovery becomes firmly entrenched and self-sustaining. This is especially so given the renewed heightened uncertainty created by the on-going third wave of Covid in Pakistan and the fiscal consolidation expected this fiscal year. As a result, the MPC noted that it was important for monetary policy to remain supportive. The MPC observed that given the Covid-related uncertainties, the cost of withdrawing monetary stimulus too soon exceeded that of withdrawing too late.
Looking ahead, in the absence of unforeseen circumstances, the MPC expects monetary policy to remain accommodative in the near term, and any adjustments in the policy rate to be measured and gradual to achieve mildly positive real interest rates over time. If demand side pressures emerge as the recovery becomes more durable and the economy returns to full capacity, the MPC noted that it would be prudent for monetary policy to begin to normalize through a gradual reduction in the degree of accommodation. This would help ensure that inflation does not become entrenched at a high level and financial conditions remain orderly, thereby supporting sustainable growth.
In reaching its decision, the MPC considered key trends and prospects in the real, external and fiscal sectors, and the resulting outlook for monetary conditions and inflation.
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SBP grants commercial license to PayFast
KARACHI: PayFast, the indigenous payments solution by APPS, has become first payment gateway to receive a commercial license from the State Bank of Pakistan (SBP), a statement said on Tuesday.
It said that the payment system enables merchants, billers and aggregators to receive payments from their customers through a variety of methods such as bank accounts, wallets and domestic and international payment schemes. The gateway operates with state of the art security, thereby mitigating risk for its customers through PCI-DSS certification anda data-driven fraud monitoring system.
PayFast addresses merchant pain points while accepting orders online, which has seen a striking escalation since the covid-19 pandemic.
The number of e-commerce merchants registered with banks has increased from 1,400 to almost 2,500 in a year, contributing to Pakistan’s exponential growth in e-commerce, which is all set to cross $3 billion by the end of 2021.
This growth can also be attributed to increasing connectivity and internet access, allowing businesses to thrive online.
The number of3G/4G subscribers have jumped to 100 million. PayFast, therefore, enhances acceptability of payments for these merchants by offering a diverse range of instruments at competitive fees.
Adnan Ali, CEO of APPS, said in a statement, “APPS was founded with the primary aim to revolutionize the digital payments services in Pakistan, and expand as a regional fintech player.
“We are thankful to the State Bank for continuing to support us and creating a space for Fintechs, and especially the Payment Systems Department headed by the forward thinking leadership of Sohail Javaad.”
Arshad Raza, Chairman of the Board for APPS, said in a statement: “When we invested in this startup envisioned by Avanza Solutions, we always believed that Pakistan’s payments market would be immensely lucrative and would see unmitigated performance in the coming years.
“This commercial licenseis a testament to that vision.It is with great pride that we celebrate this day as part of the revolution in transforming Pakistan into a cashless society.”
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Current account posts $773 million surplus in ten months
KARACHI: The current account balance has posted a surplus of $773 million during first ten months (July – April) of 2020/2021 as compared with a deficit of $4.657 billion in the corresponding period of the last fiscal year, according to statistics released by State Bank of Pakistan (SBP) on Tuesday.
Deficit of trade and service has widened by $22.736 billion during first ten months of the current fiscal year as compared with the deficit of $20.599 billion in the corresponding period of the last fiscal year.
Primary balance has shown a deficit of $4.025 billion during the period under review as it narrowed from the deficit of $4.64 billion in the same period of the last fiscal year.
The major component in surplus of the current account is significant rise in worker remittances. The inflow of remittances increased to $24.24 billion during July – April 2020/2021 when compared with $18.79 billion in the corresponding period of the last fiscal year.
The current account balance posted a deficit of $200 million in April 2021 as compared with deficit of $33 million in March 2021 and deficit of $510 million in April 2020.
Analysts at Arif Habib Research said that it is quite certain that Pakistan is likely to end up with a Current Account (CA) surplus this fiscal year (FY21) of around USD 607 million.
This surplus comes after a gap of 10 years, last witnessed in FY11 of USD 214 million. Despite an expectation of more than 100 percent jump in the trade deficit compared to FY11’s figure, the primary reason for this surplus is the unprecedented and spiraling jump in remittance flows- defying the initial prediction of a decline due to the pandemic.
Moreover, the government seems to be in a comfortable zone given the foreign reserves floating around USD 23 billion mark, providing further support to the overall external position.
As for the stats, the SBP expects CAD to clock in below 1 percent of GDP for FY21 due to strong remittances and high value-added textiles-led exports. However, in FY22, we may see current account balance slipping into deficit (USD 4.4 billion), as trade deficits widens with imports picking up and workers remittances staying stable at the current levels (above ~USD 2.3bn per month).
It is pertinent to note that Pakistan has to rely on the current account deficit because it has been an essential aspect for overall economic growth with imports comprising heavily of capital assets. However, the concern here is the deficit’s sustainability that should be analyzed.
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Rs137.8bn cash withdrawn through ATMs during Eid Holidays: SBP
KARACHI: State Bank of Pakistan (SBP) on Monday said that general public made cash withdrawal to the tune of Rs137.8 billion during holidays of Eid ul Fitr.
A record Rs.827.2 billion were withdrawn through 63.2 million transactions during Ramadan and Eid holidays, whereas Rs.137.8 billion were withdrawn through 11.6 million transactions during Eid holidays only.
The SBP in collaboration with commercial banks has been taking a number of steps in order to ensure maximum availability of ATM related services to its customers especially during Ramadan and long holidays including Eid and other festivals.
Consequently, the joint efforts of SBP and commercial banks saw an average of 96.5% uptime recorded in ATM services during Ramadan and Eid-ul-Fitr. This further improved to 98% uptime, during the Eid-ul-Fitr holidays.
SBP initiated a Special ATM Monitoring exercise during the holy month of Ramadan and on long EId-ul-Fitr holidays keeping in view the high demand for cash.
In this regard a dedicated team within SBP was formed to oversee the nationwide ATM Operations of all banks through both On-site and Off-site inspections and monitoring.
Dedicated SBP staff remained available round-the-clock to liaison with banks in order to ensure that uninterrupted ATM related services remain available to the customers during the long Eid-ul-Fitr holidays spanning over nine days.
SBP teams received more than 500 complaints from public that were immediately taken up with the banks for resolution in the shortest possible time.
SBP appreciates efforts of the banks in ensuring high availability of ATMs during Ramadan and Eid holidays.
The ATM uptime has also been encouraging as it was difficult for banks to mobilize ATM Monitoring teams on-ground for rectification of issues because of mobility restrictions and issues related to availability of spare parts due to closure of markets etc.
SBP firmly resolves to keep facilitating public and carrying out similar exercises in future as well to facilitate the general public at large.
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Exchange companies allowed export foreign currencies on consignment basis
KARACHI: The State Bank of Pakistan (SBP) on Monday allowed exchanged companies to export foreign currencies other than US Dollars on consignment basis.
The SBP said that under Exchange Companies Manual the exchange companies are allowed to export permissible foreign currencies other than US Dollars.
“In order to further streamline the business of Exchange Companies keeping in view the emerging AML/CFT standards, it has been decided that Exchange Companies may export foreign currencies other than US Dollars on consignment basis only through cargo/security companies registered in Pakistan,” the SBP said.
Further, the earlier mechanism for individual based export/import of foreign currencies by Exchange Companies stands discontinued, it added..
Accordingly, Chapter-5 of the Exchange Companies Manual along with its Annexure-5 has been revised which is enclosed herewith for meticulous compliance.
Further Para 9(iv), Chapter-3 of Exchange Companies Manual also stands revised as under:
“Exchange Companies can export foreign currencies other than United States Dollar (USD) and bring in equivalent USD in their foreign currency accounts maintained with banks in Pakistan. Prior authorization from State Bank is mandatory before starting the foreign currency exports business. Detailed procedure for undertaking foreign currency export business is given in Chapter 5”.
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SBP allows banks to issue guarantees on behalf of Pakistani firms
KARACHI: The State Bank of Pakistan (SBP) on Monday allowed banks to issue guarantees on behalf of Pakistani firms and companies against the back to back / counter – guarantees of banks/development financial institutions (DFIs) rated at least A or equivalent by a credit rating agency on approved panel of the SBP.
The SBP amended prudential regulations for corporate and commercial banking and decided that banks/DFIs can issue guarantees on behalf of Pakistani firms and companies functioning in Pakistan against the back to back/counter-guarantees of banks/DFIs rated at least ‘A’ or equivalent by a credit rating agency on the approved panel of State Bank of Pakistan.
Besides, the counter-guarantee of bank/DFI situated in a foreign country is also acceptable if it has the rating of at least ‘A’ or equivalent on global or National Rating scale by Standard & Poor, Moody’s, Fitch, Japan Credit Rating Agency (JCRA) or a local credit rating agency of the respective country provided the guarantee issuing bank in Pakistan is comfortable with and accepts the counter -guarantee of such foreign bank.
Moreover, subject to the following conditions and limits, banks/DFIs can issue guarantee against the back-to-back/counter guarantee of an unrated, or rated below ‘A’, bank/DFI that is situated in a foreign country:
(a). The aggregate amount of all such guarantees at any point in time should not exceed 10% of the bank’s/DFI’s own equity as disclosed in the latest audited financial statements;
(b). The banks/DFIs will have a board of directors (BoD) approved policy having internal limits for acceptance of such counter guarantees based on, inter alia, their own risk appetite and relevant risk factors. The policy may also set more conservative limits than as prescribed in para (a) above. There shall also be instituted a mechanism to monitor such exposures and limits.“
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Total foreign investment surges by over 98pc in 10 months
KARACHI: The inflow of total foreign investment into Pakistan has surged by over 98 percent during first 10 months (July – April) 2020/2021 of the current fiscal year owing to massive investments in public debt securities.
According to data released by State Bank of Pakistan (SBP) on Friday, the total foreign investment into the country increased to $3.736 billion during first ten months of the current fiscal year as compared with $1.884 billion in the corresponding months of the last fiscal year.
The foreign public investment in debt securities has increased to $2.463 billion during the period under review as compared with the outflow of $234 million in the same period of the last fiscal year.
The foreign private investment fell by around 40 percent to $1.273 billion during first ten months of the current fiscal year as compared with $2.118 billion in the corresponding months of the last fiscal year.
The major component of foreign private investment i.e. foreign direct investment (FDI) registered a decline of 32.5 percent to $1.553 billion during July – April 2020/2021 as compared with $2.301 billion in the same period of the last fiscal year.
The other component of the foreign private investment i.e. portfolio investment in the stock market witnessed a sharp outflow of $280 million during the period under review as compared with the outflow of $182.7 million in the same period of the last fiscal year.
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SBP cuts SLR requirement for exchange companies to 15pc
KARACHI: The State Bank of Pakistan (SBP) on Thursday reduced the requirement of Statutory Liquidity Reserve (SLR) for exchange companies from 25 percent to 15 percent in order to channelize home remittances and foreign exchange.
In a statement the central bank said it had revised SLR requirement of exchange companies from 25 percent to 15 percent of their capital. The enhanced liquidity with exchange companies will enable them to further channelize home remittances and foreign exchange.
During the year ended June 2020 Exchange Companies, through their tie up arrangements abroad, have channelized home remittances of $1.44 billion, while this figure stands at $1.67 billion for ten months of current year i.e. 2020/2021.
This regulatory intervention of State Bank would provide increased liquidity to Exchange Companies to enable them to play their role in increasing the remittances flow and the public will be further facilitated in timely and conveniently receiving home remittances from more than 1,200 outlets of Exchange Companies across Pakistan.
At present, out of twenty-seven exchange companies of ‘A’ category, 18 exchange companies are providing home remittances services.