KARACHI: State Bank of Pakistan (SBP) on Sunday directed all banks to observe extended working hours to facilitate collection of duty and taxes on Monday November 30, 2020.
A notification issued by the central bank, stated that in order to facilitate the collection of government receipts / duties / taxes, it has been decided that the field offices of SBP Banking Services Corporation (SBP-BSC) and authorized branches of National Bank of Pakistan (NBP) will observe extended banking hours till 9:00 PM on November 30, 2020 (Monday) for which purpose a special clearing has been arranged at 6:00 P.M. on the same day by the NIFT.
All banks are, therefore, advised to keep their concerned branches open on November 30, 2020 (Monday) till such time that is necessary to facilitate the special clearing for Government transactions by the NIFT.
KARACHI: The liquid foreign exchange reserves of the country have increased by $467 million to $20.552 billion by week ended November 20, 2020, State Bank of Pakistan (SBP) said on Thursday.
The foreign exchange reserves of the country were at $20.085 billion by week ended November 13, 2020.
The official reserves of the SBP increased by $484 million to $13.415 billion by week ended November 20, 2020 as against $12.931 billion a week ago.
The SBP attributed the increase to official government inflows.
The reserves held by commercial banks eased by $17 million to $7.137 billion by week ended November 20, 2020 as against $7.154 billion a week ago.
KARACHI: The monetary policy committee of the State Bank of Pakistan (SBP) has decided to keep the key policy rate unchanged at 7 percent for next two months.
KARACHI: The State Bank of Pakistan (SBP) on Friday amended regulations to incentivize banks for financing low cost and affordable housing.
A statement said that the central bank is constantly providing enabling regulatory environment to promote housing and construction finance.
This is an important sector that has significant economic linkages with other sectors in the economy and the current level of credit provision in this sector is at a very low level of less than 1 percent of GDP which is much lower than in other similar countries and in the region.
To support the provision of finance to this sector and especially facilitate affordable housing, SBP has now announced five regulatory relaxations to incentivize banks for financing low cost and affordable housing.
Firstly, the definition of low cost housing finance used in the current regulations for banks has been aligned with definition used under Government Markup Subsidy Facility for Housing Finance eligible under Tiers I & II of housing finance.
Specifically, in the SBP regulations, the value of housing unit has been increased from Rs 3 million to Rs 3.5 million with maximum loan size increased from Rs 2.7 million to Rs 3.15 million. Consequently, the incentive for low cost housing finance will increase for banks as they will not only be able to enjoy markup subsidy facility by the Government but the regulatory incentives under low cost housing finance by SBP as well.
Current regulations and banking practices require banks to obtain documentary evidence of income. Provision of this information is difficult for people generating income from informal sources which are generally in low income segments.
In order to facilitate financing for this segment, State Bank is urging the banks to use alternate methods to identify income sources and assess the credit worthiness of the borrower.
The 2nd and 3rd type of relaxations are being given to facilitate financing for this segment. Accordingly, under 2nd relaxation, banks have been exempted from the requirement of using ‘verifiable income’ for the purpose of calculating Debt Burden Ratio (DBR) in case of low cost housing finance where banks are using income proxies and where income of borrower is not verifiable.
Resultantly, borrowers with ‘non-verifiable income,’ estimatedby banks using income proxies, will also become eligible to avail low cost housing finance.
Thirdly, banks have also been exempted from the requirement of observing DBR, in case of low cost housing finance, where banks are using repayment surrogates like rent, utility bills, telcos bills, etc. to assess repayment capacity of borrower. Hence, borrowers without verifiable or non-verifiable income will become eligible to avail low cost housing finance.
Fourthly, banks have been exempted from the requirement of Internal Credit Risk Rating System for the low cost housing finance till September 30, 2022 as their current systems do not specifically cater for low cost housing finance.
Accordingly, borrowers of low cost housing finance who cannot avail financing due to banks internal credit rating criteria will now become eligible if the bank is otherwise satisfied. This time barred relaxation will provide banks to develop their Internal Credit Risk Rating Systems for low cost housing finance.
Finally, in order to provide comfort to the borrowers who have liquid securities or already have a housing unit, banks have been allowed to extend housing finance for purchase/construction of a residential property by accepting existing residential property or liquid securities in lieu of equity contribution for housing finance at the time of calculations of Loan to Value ratio.
Financing bank will create its lien on existing residential property/liquid securities in addition to mortgage of residential property being financed.
It is expected that the above regulatory incentives would provide further impetus to SBP’s on-going efforts to accelerate housing and construction finance in Pakistan. It is reminded that banks have already been given mandatory targets of 5 percent of their private sector advances as housing and construction finance by December 31, 2021.
KARACHI: The liquid foreign exchange reserves of the country have crossed over $20 billion by week ended November 13, 2020, State Bank of Pakistan (SBP) said on Thursday.
The foreign exchange reserves of the country increased by $178 million to $20.085 billion by week ended November 13, 2020 as compared with $19.907 billion a week ago.
The foreign exchange reserves of the central bank increased by $190 million to $12.931 billion by week ended November 20, 2020 as compared with $12.741 billion a week ago.
The foreign exchange reserves held by commercial banks fell by $12 million to $7.154 billion by week ended November 13, 2020 as against $7.166 billion a week ago.
The State Bank of Pakistan (SBP) announced on Thursday that the country has achieved a current account surplus of $1.16 billion during the first four months (July – October) of the fiscal year 2020/2021. This marks a significant turnaround from the same period last year, when Pakistan recorded a current account deficit of $1.42 billion.
KARACHI: The official estimates of Bureau of Immigration and Overseas Employment (BEOE) revealed that over 100,000 overseas job for which the recruitment process was going on in Pakistan, was disrupted due to COVID and is not going to recover unless the recruiting projects are revived.
The bureau categorizes this category as a potential loss, according to a report of State Bank of Pakistan (SBP) released on Wednesday.
According to the official estimates of BEOE, more than 8.8 million Pakistanis were living abroad as of December 2017. Of these, 54 percent resided in the Gulf region, and the rest in other destinations, including Europe, UK, US, Canada, and Australia.
Furthermore, during the last three years, around 1.7 million people left for different destinations, of which around 98 percent proceeded for employment in the Gulf region and only a small fraction went to acquire permanent residency in high-income countries.
During the Covid-19 crisis, BEOE records reveal multiple channels of potential job losses for migrant Pakistanis.
Around 50,000 Pakistani migrants faced layoffs in different countries. These jobs may not be recovered in the short term and are thus extremely vulnerable.
Around 60,000 Pakistanis were recruited for overseas work, but could not proceed abroad due to travel restrictions and suspension of flight operations. The Bureau also categorizes these jobs as extremely vulnerable.
In addition to these, 50,000 emigrants (Azaad Visa excluded) returned on paid/unpaid leaves as of June 2020. These workers have not been laid off, but their job continuation entails risk.
For most of the returning workers, the lockdowns resulted in permanent cessation of income along with the loss of legal status and end of accommodation and health benefits associated with employment. In case of forced dismissals, workers also did not receive compensation, and other dues and therefore found it difficult to arrange travel expenses on their own.
The recent figure of stranded Pakistanis in different destinations is highly skewed towards the Gulf region with more than 91 percent in only two countries, i.e., Saudi Arabia and the UAE.
KARACHI: State Bank of Pakistan (SBP) on Wednesday said that listing of local firms on the world leading online marketplace, Amazon.com likely help to increase exports of the country.
The central bank while discussing the digital connectivity at the time of coronavirus pandemic, said the Ministry of Commerce has facilitated enlisting more than 30 exporters on the world’s leading online marketplace, Amazon.com, on a trial basis.
“On a successful completion of the test-run, this will provide an opportunity to more domestic firms to sell via Amazon and expand their outreach to global markets. This could potentially open a new avenue for Pakistan to increase its exports and create new employment opportunities locally,” the SBP said.
Going forward, the cross-border B2C ecommerce regulatory framework developed by the SBP and the Web Based One Customs e-commerce module that is to be developed by the FBR, will help facilitate online sales of exporting firms by allowing hassle-free documentation and shipment of export orders.
The SBP said that Pakistani authorities have been proactively working on the digitization front during the past half-decade or so; positive developments include the approval of the country’s first ever e-commerce policy in 2019.
The policy aims to provide an enabling environment to private businesses, create new employment opportunities for youth and women, and provide an opportunity to the government to regulate the e-commerce sector in the public interest.
To track the implementation of the policy and to facilitate e-commerce businesses, a National Ecommerce Council (NEEC) has also been established.
Its main functions are to monitor and support the advancement of e-commerce in the private sector, foster innovation in the implementation of the necessary programs and initiatives, create awareness of the importance of e-commerce towards the overall growth in the economy, and provide relevant feedback and recommendations to the government.
KARACHI: State Bank of Pakistan (SBP) has projected GDP growth between 1.5-2.5 percent for the current fiscal year 2020/2021 with up to 9 percent average inflation for the year.
The SBP on Wednesday issued annual report on state of economy for the year 2019/2020.
The government has set GDP growth target at 2.1 percent for the current fiscal year as against a negative growth of 0.4 percent in the last fiscal year.
The central bank projected fiscal deficit between 6.5-7.5 percent of the GDP for the current fiscal year lower than 8.4 percent in the last fiscal year. Similarly, current account deficit has been estimated between 1.0-2.0 percent for the ongoing fiscal year.
The inflows of remittances are expected at $22-23 billion during the current fiscal year.
The SBP said that as things stand, Pakistan has managed to control the virus spread. Although fresh infections have posted a slight increase in recent weeks, the overall level of active cases remains significantly lower than the peak observed in June 2020.
While the prevalent risk of another spike calls for a continuation of social distancing norms, the reopening of the economy (including services) has helped reduce some of the uncertainty around the overall macroeconomic outlook.
However, the global containment of the virus still remains elusive. Active cases in the US, the UK, India, France, and Italy remain high. Advanced European economies are bracing for another wave, with rising number of cases witnessed in the UK, Belgium, Italy and Greece. Social distancing norms and localized mobility restrictions are being re-introduced in many countries, whereas recent mobility data also suggests plateauing recovery across many countries.
As a result, while a rebound in growth is expected in nearly all the regions in 2021, downside risks remain high. For now, with the ease in containment measures, retail sales have recovered in the US and the major EU economies, though this recovery was mainly concentrated in groceries, healthcare supplies, and consumer electronics.
Clothing retail sales have yet to recover, as they continued to decline in double digits between June and August in the US and EU. The overall global economic outlook also remains uncertain due to the still-high infection rate in some countries, expiration of temporary unemployment support measures in the US, and continuation of the US trade dispute with China.
These uncertainties continue to present downside risks to Pakistan’s exports growth. Preliminary customs’ records for the first quarter of FY21 show a decline of 0.7 percent YoY in the country’s exports, although a 7.0 percent increase was recorded in the month of September. For the full year, SBP expects export values within the range of US$ 23.4 – 23.8 billion in FY21 – higher than the US$ 22.5 billion recorded in FY20.
Similarly, the SBP expects full-year imports to remain higher than last year, given the anticipated pickup in economic activity following the lifting of lockdowns, and firms’ efforts to replenish inventories. In particular, the concessions for the construction industry and progress on housing finance would revive steel imports. In addition, lower domestic production and supply-management issues have necessitated imports of wheat and sugar.
Energy imports, however, would depend on the ongoing substitution trend between imported and local fuel sources. As for oil prices, though having more than doubled from 19-year lows (US$ 19/bbl) in April 2020, Brent still hovered around US$ 40 per barrel by end-October.
Through the end of CY-2021, the crude oil market is projected to remain range-bound – due to weaknesses in the aviation sector and the risk of re-imposition of lockdowns amid a still high number of active Covid cases.
Given this stability in oil prices, domestic fuel prices are likely to remain steady during FY21. However, as previous adjustments in the power and gas tariffs are due, there is an upside risk to overall energy inflation.
Conditions in the domestic food market are also subject to risk. The recent resurgence in wheat and sugar prices continues to highlight commodity-management problems in the country. Moreover, food prices may also come under pressure due to widespread torrential rains and increased risks of flooding, which may cause crop losses. In contrast, the non-food-non-energy segment of CPI is expected to ease further, as chances of a significant pick-up in domestic demand remain low due to weak financial position of businesses and households.
Overall, the SBP expects headline inflation to fall within the range of 7-9 percent in FY21. On the fiscal side, challenges remain, as the government continues to focus on addressing Covid-related economic and social outcomes and supporting the initial economic recovery.
For the full-year, the government has set the target for the fiscal deficit at 7 percent of GDP, with the primary balance also estimated to show a deficit of 0.5 percent.
Thus, with a tight fiscal position, a significant contraction in grants (social transfers) and subsidy outlay – the two major areas with large slippages in FY20 – is targeted for FY21.
In case of any overshooting under these heads, the debt servicing relief of US$ 2.7 billion (equivalent to 1 percent of GDP) provided to Pakistan under the G-20’s Debt Servicing Suspension Initiative will help create expenditure space for Covidrelated spending.
In terms of growth, the government has set the GDP growth target at 2.1 percent for FY21. This year-on-year improvement is expected to come from a steady performance of agriculture and a recovery in the services sector, especially finance & insurance, and transport & communications. Industrial performance is also estimated to post a modest recovery, primarily on account of a much contained contraction in large-scale manufacturing as compared to FY20.
The SBP expects GDP growth to stay within the range of 1.5 – 2.5 percent during FY21. Nonetheless, these growth projections are subject to risks, including from the evolution of Covid, extreme weather conditions, external demand, and progress on the reform front. In particular, earlier estimates for kharif crops (especially cotton) do not seem promising, given weaknesses in farmers’ financial condition and heavy rains causing losses to standing crops.
There are also some upside risks, especially in the context of a resurgence in business confidence in the country following the ease in lockdowns and falling Covid cases.
The August wave of the IBA-SBP confidence surveys suggests that the business confidence index not only posted a sharp surge compared to the previous two waves, but it has also come in positive territory after remaining in the negative zone for three consecutive waves.
The improvement in the expected business confidence index (a subcomponent of the overall business confidence index) was more pronounced, as it touched its second-highest level since the start of this survey. Importantly, this optimism has also begun to reflect in planned investment activity in the country. Funding requests under the SBP’s Temporary Economic Refinance Facility (TERF) have risen sharply in recent weeks.
The scheme, which provides subsidized financing to businesses undertaking capex or BMR, has so far attracted 338 projects. These developments, along with optimism in the housing and construction sectors, could help accelerate the economy’s recovery process in FY21.
Given the fact that the TERF is geared towards supporting investment activities in the country, the uptick in its utilization is encouraging from a structural viewpoint as well.
Pakistan has historically been a consumption-oriented economy, which resulted in unsustainable growth spurts and investment rates not only remaining lower than most EMDEs, but also declining in absolute terms over the past few decades. In this regard, a strong response to incentive schemes such as TERF bodes well for the future economic trajectory, as capital formation activities would help enhance and potentially diversify the output capacity of Pakistan going forward.
