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Tag: State Bank of Pakistan

  • Pakistan’s GDP growth contraction not severe as expected globally: SBP

    Pakistan’s GDP growth contraction not severe as expected globally: SBP

    KARACHI: The scale of the COVID-19 shock is underscored by the fact that for the first time in 68 years, as per the provisional estimates, Pakistan’s real GDP growth is set to contract in FY20.

    “At 0.4 percent, this contraction is not as severe as that expected in most parts of the world due to COVID-19,” State Bank of Pakistan (SBP) said in its third quarterly report on the country’s economy issued on Thursday.

    According to the report, successful stabilization measures that had fostered macroeconomic improvement in Jul-Feb FY20 provided a valuable cushion against the downturn faced from late March 2020 onward in the wake of the COVID-19 outbreak.

    In particular, major progress had been made during Jul-Feb FY20 period in curbing the fiscal and current account deficits on the back of strong revenue growth, policy shift to a market-determined exchange rate, and build up in foreign exchange reserves buffers. Following this period of necessary stabilization, there were also encouraging signs of recovery in the real economy, including exports.

    This made the economy relatively better equipped to respond to any external shocks than it would have otherwise been. This pre COVID-19 strengthening of Pakistan’s fundamentals and the prudent policy response to the outbreak later on should leave Pakistan well-placed to resume its earlier trajectory of recovery once the pandemic subsides.

    As in other parts of the world, the real, fiscal, and external sectors came under visible strain thereafter as COVID-19 struck the global economy, while the inflation outlook improved as a result of weaker domestic demand and lower oil prices.

    The report emphasizes that the estimated contraction in GDP owes mainly to a decline in industrial and services sector activities.

    The large-scale manufacturing (LSM) posted an improvement during Jan-Feb 2020, driven primarily by exporting sectors with some contribution from food and fertilizer segments.

    However, this nascent recovery was derailed by COVID-19 related disruptions, with LSM growth falling 22 percent on a month-on-month basis in March.

    The agriculture sector emerged largely unscathed by COVID-19 as important crops registered a turnaround compared to last year. That said, unfavorable climate conditions and pest and locust attacks prevented some annual targets from being met.

    The services sector felt the impact of COVID-19 acutely, as evident from high frequency data and negative sectoral growth is expected in FY20.

    The report documents a similar pattern in the fiscal sector, where a primary budget recorded a surplus during Jul-Mar FY20 on cumulative basis, the first ever since 2016.

    However, it turned into a deficit during the third quarter due to COVID-19. On the one hand, the lockdown created a drag for revenue, with growth in all categories of FBR revenues turning negative in March 2020.

    On the other hand, the induced slump in economic activity and rise in unemployment created a need for greater expenditures. The government announced aRs 1.24 trillion stimulus package towards the close of Q3-FY20, consisting of a combination of targeted handouts and sector-specific outlays for agriculture, construction, and exports. While this package is expected to give much-needed relief to individuals and businesses, it would simultaneously contribute to a larger fiscal deficit in the near term.

    Regarding the external sector, the report highlights that a sharp fall in imports, healthy growth in workers’ remittances, and contraction in the services trade deficit all played a part in narrowing the current account deficit (CAD) for Jul-Mar FY20 compared to last year.

    However, the pandemic prompted foreign investors to reduce their domestic debt and equity holdings in emerging markets, including Pakistan, and growth in remittances has moderated.

    These factors together with government debt repayments affected foreign exchange reserves in March 2020. However, Pakistan has generally been less affected than many other emerging markets and foreign exchange reserves of the country have since recovered, on the back of multilateral and commercial inflows.

    The SBP report notes that the inflation outlook improved following the global and domestic spread of COVID-19.

    A marked slowdown in domestic demand, stabilizing food inflation, and historic low oil prices led to a moderation in medium-term inflation prospects.

    The Monetary Policy Committee responded swiftly, slashing the policy rate by a cumulative 625 basis points in five meetings between mid-March to end-June 2020.

    To manage the cash flows of businesses and households, SBP allowed the deferment of principal amount and restructuring of loans. In addition, SBP launched three new refinancing schemes to support employment, new investments and BMR, and improve health facilities in the country. Together, these measures are estimated to provide a benefit of up to Rs.1.3 trillion (3.1 percent of GDP) to businesses and households.

    Together with the government’s stimulus package, these measures are helping to cushion the impact of the COVID-19 outbreak. Beyond their immediate impact, these measures are expected to support the post-COVID-19 economic recovery as well.

  • SBP revises instructions for IBWs of conventional banks

    SBP revises instructions for IBWs of conventional banks

    KARACHI: State Bank of Pakistan (SBP) on Wednesday revised instructions for Islamic Banking Windows (IBWs) of conventional banks in order to enhance the share and outreach of Sharia compliant financial services.

    In a statement the central bank said that keeping in view the significant potential of Islamic Banking Windows (IBWs) in enhancing the share and outreach of Shariah compliant financial services and increase in financial inclusion, instructions have been revised for banks to expand the scope of operations of IBWs.

    IBWs can now offer all types of financing products to their customers including Corporates, SMEs, Agriculture, Housing, and Consumers. However, this facility is subject to the condition that respective IBW branch shall be converted into full-fledged Islamic banking branch within a period of three years.

    At present, Islamic banking products and services are being offered by full-fledged Islamic banks, Islamic banking subsidiaries and Islamic banking branches of conventional banks after getting approval/license from SBP. Conventional banks can open IBWs, which are dedicated counters in conventional branches, after getting permission from SBP; however, these were not allowed to offer any financing products.

    With 1,400 IBWs of 11 banks currently operational in the country, their potential to improve access to finance will increase significantly.

    Further, it will contribute towards increase in financial inclusion through provision of Shariah compliant financing facilities to vast majority of population.

    The revised instructions also incorporate different amendments or additions to existing regulations and include policy formulation on IBWs, submission of annual IBWs expansion plan, physical setup & display requirements for IBWs, opening & closure of IBWs, their fee structure, and revisions in reporting requirements.

    These revised instructions will supersede all previous instructions issued on IBWs by SBP from time to time.

    It is expected that this new policy measure will contribute towards achieving the targets set under National Financial Inclusion Strategy for Islamic banking, which envisages attaining a share of 25 percent percent in total assets and deposits of the banking industry and 30 percent share in total branch network of the industry by the end of 2023.

  • Banks approve financing of Rs126bn for employees’ wages of 2,068 businesses

    Banks approve financing of Rs126bn for employees’ wages of 2,068 businesses

    KARACHI: Banks have approved around Rs126 billion under soft loan scheme to 2,068 businesses in meeting financing requirement for salaries and wages in the wake of difficulties faced due to coronavirus pandemic, State Bank of Pakistan (SBP) said on Monday.

    The SBP said that Under the Scheme, on overall basis, up till July 1, 2020, financing of Rs125.9 billion has been approved by banks for 2068 businesses covering wages and salaries of over 1.2 million employees.

    Soon after the introduction of the Scheme, a large number of applications to avail financing were received by banks but their approvals remained slow.

    However, with the continuous efforts of SBP, banks streamlined their processes and pace of loan approvals increased.

    At the end of April 2020, only 18 percent of loan applications were approved. This has increased to 76 percent by July 10, 2020.

    Similarly, the amount of loans approved against the requested amount also improved. The acceptance ratio for amount of financing increased from 26 percent at the end of April 2020 to 82 percent on July 10, 2020.

    Consequently, the number of employees benefitting from the scheme in terms of acceptance ratio has also increased from 26 percent to 85 percent during the same period.

    To counter the negative impact of Covid-19 on the economy, the central bank introduced the refinance scheme to support employment and prevent layoff of workers, commonly known as SBP RozgarScheme, in April 2020.

    The scheme provides concessional financing to businesses for wages and salary expenses, provided they commit to not lay off their employees for the period of the loan.

    The Scheme was later complemented by a Risk Sharing Facility (RSF) of the Government of Pakistan (GoP) for SMEs and Small Corporates with turnover of up to Rs2 billion.

    Under this facility, the federal government bears up to 60 percent first loss on the principal amount portion of disbursed portfolio for SME borrowers whereas 40 percent risk coverage is available for small corporates.

    The objective of this facility is to incentivize banks to extend loans to SMEs and Small Corporates, to whom they may not cater to for risk considerations.

    The scheme was available till end June 2020 earlier, however, SBP decided to extend the validity of this scheme by another three months to end September, 2020.

    Out of the total approved amount, Rs31 billion were for 1449 SMEs and Small Corporates under the RSF as of July 10, 2020 providing benefit to 280,437 employees.

    Relative to the initial situation related to Rozgar scheme, in terms of processing and approving the requests for financing, banks performed better in catering the requests under RSF and improved further over time.

    The acceptance ratio, both in terms of number of applications and amount increased from 35 percent and 37 percent respectively on May 15, 2020 to 72 percent and 71 percent on July 10, 2020.

    Following similar trends, the total number of employees benefitting from the acceptance of financing requests increased from 36 percent to 75 percent during the same period.

    The performance of banks, however, in terms of processing the number of applications and financing approved is limited to few banks.

    Among the Top Performing Five Banks, for both, JS Bank Limited, Habib Bank Limited (HBL), Bank Al-Habib Limited, Bank Alfalah Limited and Askari Bank Limited have contributed the highest in terms of both approving the number of applications and amount since the beginning of this scheme (RSF) till July 10, 2020.

    These top performing five banks provided Rs18.1 billion or 58 percent of the overall approved financing amount eligible for RSF under SBP Rozgar Scheme up till July 10, 2020.

    Their share declined from 61 percent earlier on June 12, 2020 showing that other banks have improved their performance. Their individual performance is also reflected from the fact that the cumulative approved financing by these banks ranged from Rs2.2 to Rs4.6 billion.

  • SBP allows business to avail loan scheme for early payment of salary, wages

    SBP allows business to avail loan scheme for early payment of salary, wages

    KARACHI: State Bank of Pakistan (SBP) has allowed businesses to avail loan scheme for early payment of salary and wages in the wake of Eid-ul-Azha.

    The SBP also relaxed condition for obtaining loans from more than one bank for the payment of salary and wages.

    The central bank in a notification issued on Friday said that in order to facilitate businesses facing problems in availing financing under the above schemes from one bank due to their credit limits or for any other reason, it has been decided to allow them to avail financing from more than one bank.

    However, a business cannot avail financing for a specific month from more than one bank.

    Further, businesses may avail financing under above schemes for early payment of wages/salaries for the month of July, 2020 before Eid-ul-Azha.

    Businesses may also avail reimbursement of wages/salaries of July, 2020 in case they make early disbursements from their own resources to their workers/employees due to Eid-ul-Azha.

    The central bank in April 2020 introduced loan scheme at reduced rate for businesses to ensure no layoff of employment and payment of salary and wages in the wake of spread of coronavirus.

  • SBP not to hold regular monetary policy committee meeting

    SBP not to hold regular monetary policy committee meeting

    KARACHI: State Bank of Pakistan (SBP) on Friday decided not to hold regular meeting of monetary policy committee meeting scheduled for July 2020.

    Given the number of MPC meetings that have taken place in recent months, and actions taken in those meetings, the MPC does not consider it necessary to hold the regular meeting of July 2020.

    The next regular meeting of the MPC will now be held in September 2020, the SBP said.

    The MPC continues to observe economic conditions and stands ready to take whatever further actions may become necessary in response to any adverse impact on the economy because of the pandemic or any other factor.

  • Foreign exchange reserves increase to $19.047 billion

    Foreign exchange reserves increase to $19.047 billion

    KARACHI: Pakistan’s liquid foreign exchange reserves have increased by $95 million to $19.047 billion by week ended July 17, 2020, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $18.952 billion by week ended July 10, 2020.

    The official reserves held by the central bank increased by $66 million to $12.121 billion by week ended July 17, 2020 as compared with $12.055 billion a week ago.

    Similarly, the foreign exchange reserves held by commercial banks improved by $29 million to $6.926 billion from $6.897 billion a week ago.

  • Complaints against banks double in four years: SBP

    Complaints against banks double in four years: SBP

    KARACHI: The State Bank of Pakistan (SBP) on Thursday said that complaints against banks have doubled in four years owing to effective dispute resolution and awareness of consumers.

    The SBP said that the complaints against banks during past four years have increased from 774,656 in 2016 to 1,549,837 in 2019.

    State Bank of Pakistan (SBP) has conducted a four year (2016-2019) review of complaints against Banks/MFBs/DFIs. The objective of the review was to gain insights on effectiveness of complaint management at banks.

    The salient features of the review are being published to emphasize SBP’s narrative that responsible complaint handling is the core element of Fair Treatment of Consumer (FTC).

    This review is conducted in addition to various regulatory measures to enhance consumer grievance handling in the industry including the issuance of detailed guidelines on complaint management at banks and self-assessment framework.

    It is pertinent to mention here that responsible banking conduct and FTC is one of the key regulatory agendas of the State Bank of Pakistan (SBP).

     SBP recognizes that effective and efficient consumer grievance handling mechanisms are crucial elements of FTC regime, therefore, it considers consumer complaints as an opportunity to improve banking services and increase customer satisfaction.

    This increase can be attributed to improved visibility and access of dispute resolution mechanism coupled with enhanced consumer awareness. Further, this is also due to the fact that number and value of banking transactions have increased substantially.

    For instance, the volume and value of ATM/debit card transactions have increased by 101 percent and 110 percent respectively over the reporting period.

    The number of deposit accounts per ATM and per branch shows increase of 62 percent and 81 percent respectively. Similarly, during 2016 to 2019, volume and value of E-banking transactions have substantially increased by 112 percent and 152 percent respectively on account of 71 percent increase in E-banking users.

    Moreover, credit card related transactions increased from 18 to 39 million showing an increase of 118 percent over a span of 4 years. Accordingly, the increase in complaints over the same period can be witnessed as concentrated in ATM/Debit Card, Account maintenance, E- Banking and Credit Cards.

    In terms of addressing the complaints, the resolution rate over the period 2016-2019 remained above 97 percent at each year’s end.

    The average time taken for resolution of complaints remained within regulatory turn around times. However, delays were observed in sending acknowledgments, interim and final responses.

    It may be mentioned here that banks being the first forum of redressal, have been handling 97 percent and above of the total complaints of the industry while less than 3 percent of complaints were escalated at higher levels including State Bank of Pakistan, Banking Mohtasib, and Pakistan Citizen Portal established by the Prime Minister Delivery Unit.

    In order to boost performance of complaint handling at banks and promote competition, SBP plans to further enhance the related disclosures which may include publishing of bank-wise complaint handling performance indicators in the near future by SBP.

    Currently, banks themselves are required to give disclosure about the complaint management in their annual audited account for public information.

  • SBP enhances financing limit to Rs2 billion for renewable energy schemes

    SBP enhances financing limit to Rs2 billion for renewable energy schemes

    KARACHI: The State Bank of Pakistan (SBP) has increased cumulative financing limit to Rs2 billion and also enhanced project size to 5MW.

    According to a statement issued on Wednesday, the central bank said it had enhanced the scope of its Refinance Scheme for Renewable Energy by allowing financing under category III of the scheme to solar and wind based energy sale companies.

    In light of the feedback received from stakeholders, the size of the project established by vendor/ supplier/ energy sale company has been enhanced from 1 MW to 5 MW. Accordingly, the cumulative financing limit has also been increased from Rs.1 billion to Rs.2 billion.

    SBP Financing Scheme for Renewable Energy was announced in June 2016with an aim to help addressing the challenges of energy shortages and climate change in the country.

    The scheme comprised of two categories: Category 1 allowed financing for setting up of renewable energy power projects with capacity ranging from 1 MW to 50 MW for own use or selling of electricity to the national grid or combination of both.

    Category II allowed financing to domestic, agriculture, commercial and industrial borrowers for installation of renewable energy based projects/ solutions of up-to 1 MW to generate electricity for own use or selling to the grid/distribution company under net metering.

    Later, in July 2019, SBP introduced a new Category III for facilitating financing to vendors/suppliers for installation of wind and solar systems/solutions of upto 1 MW. SBP also launched a Shariah complaint version of the scheme in August 2019.

    Since the introduction of the scheme, total outstanding financing under the Scheme has reached to Rs.15.6 billion for 217 projects having potential of adding 292 MW of energy supply.

    This revision in the scheme is expected to not only attract fresh local and foreign investment in the sector but also facilitate production of clean energy in the country, helping in managing climate change.

  • Annual foreign direct investment grows by 88 percent

    Annual foreign direct investment grows by 88 percent

    KARACHI: Foreign Direct Investment (FDI) into the country registered 88 percent growth to $2.56 billion during fiscal year 2019/2020, State Bank of Pakistan (SBP) said on Friday.

    The FDI posted $1.198 billion increase during the fiscal year under review as compared with $1.36 billion in the preceding fiscal year i.e. 2018/2019.

    The inflows under the head of FDI grew by 18 percent to $3.285 billion during fiscal year 2019/2020 as compared with $2.78 billion in the preceding fiscal year. However, outflows recorded 49 percent decline to $724 million as against outflow of $1.42 billion in the preceding fiscal year.

    The portfolio investment registered 32 percent contraction in outflows during the period under review. The outflows from the capital market recorded $281.7 million during fiscal year 2019/2020 as compared with the outflow of $415 million in the preceding fiscal year.

    The total foreign private investment posted 140.7 percent growth to $2.279 billion during July-June 2019/2020 as compared with $947.2 million in the preceding fiscal year.

    The foreign public investment in debt securities witnessed outflow of 241.3 million during fiscal year 2019/2020 as compared with $1 billion in the preceding fiscal year.

    The total foreign investment including public and private rose to $2.038 billion during fiscal year 2019/2020 as compared with outflow of $54.8 million in the preceding fiscal year.