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Tag: State Bank of Pakistan

  • SBP receives $1.39 billion from IMF under Rapid Financing Instrument

    SBP receives $1.39 billion from IMF under Rapid Financing Instrument

    KARACHI: State Bank of Pakistan (SBP) on Wednesday said that it has received $1.39 billion from International Monetary Fund (IMF) under Rapid Financing Instrument program to fight against COVID-19.

    The Executive Board of the IMF last week approved the disbursement of $1.386 billion under the Rapid Financing Instrument to address the economic impact of the Covid-19 shock.

    With the near-term outlook deteriorating sharply, the authorities have swiftly put in place measures to contain the impact of the shock and support economic activity. Crucially, health spending has been increased and social support strengthened, it added.

    As the impact of the COVID-19 shock subsides, the authorities’ renewed commitment to implement the policies in the existing EFF will help support the recovery and strengthen resilience.

    The Executive Board of the International Monetary Fund (IMF) approved a purchase of Pakistan under the Rapid Financing Instrument (RFI) equivalent to SDR 1,015.5 million (US$ 1.386 billion, 50 percent of quota) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

    While uncertainty remains high, the near-term economic impact of COVID-19 is expected to be significant, giving rise to large fiscal and external financing needs. The IMF support will help to provide a backstop against the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing the pandemic and mitigating its economic impact.

    The IMF remains closely engaged with the Pakistani authorities and as the impact of the COVID-19 shock subsides will resume discussions as part of the current EFF.

    Following the Executive Board discussion, Geoffrey Okamoto, First Deputy Managing Director and Acting Chair, made the following statement:

    “The outbreak of Covid-19 is having a significant impact on the Pakistani economy. The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing. This has created an urgent balance of payments need.

    “In this context of heightened uncertainty, IMF emergency financing under the Rapid Financing Instrument provides strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending, shoring up confidence, and catalyzing additional donor support.

    “In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability. In this context, the authorities’ policies should be targeted and temporary.

    “As the crisis abates, the authorities’ renewed commitment to the reforms in the existing Extended Fund Facility—in particular those related to fiscal consolidation strategy, energy sector, governance, and remaining AML/CFT deficiencies—will be crucial to entrench resilience, boost Pakistan’s growth potential, and deliver broad based benefits for all Pakistanis.

    “Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.”

  • SBP further reduces interest rate on loan obtained for wages, salaries

    SBP further reduces interest rate on loan obtained for wages, salaries

    KARACHI: The State Bank of Pakistan (SBP) on Wednesday further reduced interest rate for loan obtained for wages and salaries under business incentive scheme.

    SBP has enhanced the incentive to business which are active tax payers by reducing the mark up rate for them to 3 percent that was set as 4 percent earlier.

    Now the SBP will provide refinance to banks at zero percent. This also increases the gap between the rates charged to active tax payer and the non-tax payers businesses, as the latter can be charged an end user markup rate of up to 5 percent, SBP said.

    On April 10, 2020 the State Bank of Pakistan announced an incentive scheme— entitled Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns—that enables the provision of concessional credit for payroll finance to businesses that commit to not lay off workers for the next three months.

    SBP has introduced further incentives under this scheme to support employment and avoid layoffs in the country.

    These additional incentives include relaxations in collateral requirements, further reduction in end-user rate, reimbursement of wages, special accounts for employees to receive wages, borrowing from banks other than maintaining payrolls, simplification of application form for SMEs and bank’s exposure limits.

    These additional incentives are effective as of today.

    The central bank said that based on feedback from stakeholders, SMEs including vendors and distributors were particularly facing the problem of providing security/collateral.

    To address this issue, SBP has now allowed banks for providing financing against corporate guarantees of companies in value / supply chain relationship with the borrowers. Moreover, banks have also been encouraged to provide loans without any collateral i.e. taking clean exposure of up to Rs 5 million.

    To facilitate employees for receiving wages under the scheme directly, banks have been allowed to open their accounts on the information and documents provided by the employers along with an undertaking stating that these persons are bonafide employees/workers.

    Banks will ensure verification of the employees using NADRA Verisys before activation of such accounts. These accounts, however, could be used solely for salary disbursement and withdrawal purposes only.

    Businesses have also been given flexibility to avail loan under SBPs refinance scheme for wages from any bank and they will not be limited to avail loans from the bank that manages their payroll. Further, businesses will also be able to get reimbursement of salaries pertaining to the month of April 2020 that have been disbursed through own sources, provided they have applied for financing under the scheme before disbursement and the same is subsequently approved by the banks. SMEs can apply for the financing on a simplified loan application form prescribed by SBP for this scheme.

    To facilitate the banks further for lending under the scheme, Banks’ exposure under the scheme has been exempted from the per-party or the per-group exposure limits. It will enable them to lend to borrowers that have exhausted their exposure limits.

    All these benefits will also be available to businesses availing financing under the scheme from Islamic Banking Institutions.

  • FDI inflow registers sharp growth of 137pc in July-March

    FDI inflow registers sharp growth of 137pc in July-March

    KARACHI: The inflow of Foreign Direct Investment (FDI) into Pakistan has witnessed sharp growth of 137 percent during first nine months (July – March) 2019-2020, State Bank of Pakistan (SBP) said on Tuesday.

    The FDI increased to $2.15 billion during first nine months of current fiscal year as compared with $905 million in the corresponding period of the last fiscal year.

    The inflows under this head increased to $2.69 billion during the period under review as compared with $2.14 billion in the corresponding period of the last fiscal year, showing 25.6 percent growth. The outflows, however, fell by 56 percent to $548 million during first nine months of current fiscal year as compared with $1.24 billion in the same period of the last fiscal year.

    Portfolio investment in equity market increased by 75 percent as outflow reduced to $103.6 million during July –March 2019/2020 as compared with outflow of $409 million in the corresponding period of the last fiscal year.

    Therefore, the foreign private investment increased by 312 percent to $2.044 billion in first nine months of current fiscal year as compared with $495.6 million in the same period of the last fiscal year.

  • Zakat on amount Rs46,329 and above to be deducted from bank accounts

    Zakat on amount Rs46,329 and above to be deducted from bank accounts

    KARACHI: State Bank of Pakistan (SBP) on Monday issued instructions to banks related to deduction of Zakat on amount above Rs46,329 maintained in saving bank accounts.

    The SBP said that Administrator General Zakat had notified the ‘Nisab of Zakat’ for the Zakat Year 1440-41 AH at Rs46,329.

    No deduction of Zakat at source shall be made, in case the amount tanding to the credit of an account is less than Rs46,329 on the first day of Ramzan ul Mubarak, 1141 AH.

    First day of Ramzan ul Mubarak, has already been notified as the deduction date likely to fall on April 23 or 24, 2020 (subject to appearance of the moon) for deduction of Zakat from Saving Bank Accounts, Profit and Loss Sharing Accounts and other similar accounts having credit balance of Rs46,329.

    All the Zakat collection controlling agencies have been asked to deduct the Zakat accordingly.

  • Banks directed to take facilitation measures for PM Covid-19 relief fund

    Banks directed to take facilitation measures for PM Covid-19 relief fund

    KARACHI: State Bank of Pakistan (SBP) on Monday directed banks to take measures to facilitate donations for Prime Minister’s COVID-19 Pandemic Relief Fund 2020.

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  • Foreign exchange reserves increase to $17.295 billion

    Foreign exchange reserves increase to $17.295 billion

    KARACHI: Pakistan’s foreign exchange reserves have increased by $307 million to $17.295 billion by week ended April 10, 2020.

    A week ago the foreign exchange reserves were at $16.988 billion, the State Bank of Pakistan (SBP) said on Thursday.

    The officials foreign exchange reserves of the central bank increased by $252 million to $10.974 billion by week ended April 10, 2020 as compared with $10.722 billion a week ago.

    Similarly, the foreign exchange reserves held by commercial banks increased by $55 million to $6.321 billion by week ended April 10, 2020 as compared with $6.266 billion a week ago.

  • So far 80,368 borrowers avail loan rescheduling facility

    So far 80,368 borrowers avail loan rescheduling facility

    KARACHI: State Bank of Pakistan (SBP) on Wednesday said that around 80,368 borrowers availed deferment of principal repayment facility, which was granted considering outbreak of coronavirus.

    The SBP said that under the relief package up till April 10, 2020 around 80368 borrowers benefitted from deferment of principal repayment worth Rs20 billion.

    Additional Rs 1.4 billion has been restructured. Meanwhile, 5126 application were under process, the SBP said.

    Previously, the SBP through a circular noted that banks and DFIs will defer the payment of principal on loans and advances by one year.

    To avail this relaxation, borrowers should submit a written request to the banks before June 30, 2020.

    They will, however, continue to service the mark-up amount as per agreed terms and conditions.

    The deferment of principal will not affect borrower’s credit history and such facilities will also not be reported as restructured/rescheduled in the credit bureau’s data.

    The total amount of principal coming due over the next year is about Rs. 4,700 billion.

  • SBP expands incentive scheme for home remittance promotion

    SBP expands incentive scheme for home remittance promotion

    KARACHI: State Bank of Pakistan (SBP) on Wednesday expanded incentive scheme for exchange companies for promoting home remittances through formal channels.

    The SBP previously on December 06, 2019 introduced the incentive scheme on which exchange companies were allowed market expenses reimbursement of Re. 1 per each incremental US dollar mobilized over 15 percent growth.

    The SBP in this regard decided that with immediate effect the existing incentive scheme for marketing of home remittances i.e. Re 1 against US Dollar 01 of remittance amount beyond 15 percent growth over last year may now be based on tiered growth i.e. Rs. 0.50 on 5 percent growth, Rs. 0.75 on 10 percent growth and Rs. 1.00 on 15 percent growth.

    Through another circular issued to authorized dealers in foreign exchange and microfinance banks, the SBP said that it has been decided with immediate effect that the prevailing rate of TT charges may be enhanced from SAR 10/- to SAR 20/- for transactions between USD 100-200.

    The SBP further said that the existing Incentive scheme for marketing of home remittances i.e. PKR 01 against USD 01 of remittance amount beyond 15 percent growth over last year may now be based on tiered growth i.e. Rs. 0.50 on 5 percent growth, Rs. 0.75 on 10 percent growth and Rs. 1.00 on 15 percent growth.

  • Vehicle imports fall 10-year low on regulatory restrictions: State Bank

    Vehicle imports fall 10-year low on regulatory restrictions: State Bank

    KARACHI: The State Bank of Pakistan (SBP) has said that the regulatory restrictions on vehicle imports under the gift and baggage schemes continued to dent Completely Built Unit (CBU) imports.

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  • COVID-19 makes economy highly uncertain: SBP

    COVID-19 makes economy highly uncertain: SBP

    KARACHI: The State Bank of Pakistan (SBP) on Tuesday said that the global and domestic spread of Covid-19 has brought an exceptional set of challenges for the country.

    “The spillovers from the global economy and the infection-containment measures in the country are bound to weaken the economic activity and consumer demand and adversely impact supply,” the SBP said in its Second Quarterly Review on Pakistan Economic.

    As the situation is extremely fluid and highly uncertain, the economic outlook remains subdued compared to the pre-outbreak estimates.

    The government and the SBP have therefore taken a number of measures to mitigate the adverse impacts of Covid-19 on the economy.

    These include sizable fiscal spending programs, tax reliefs, and incentives to the construction industry.

    As for the SBP, within a span of 8 days (in March 2020), the Monetary Policy Committee cut the policy rate by 225 basis points.

    Furthermore, the SBP has announced multiple measures to provide relief to borrowers for one year on principal loan repayments, offer concessional financing to businesses that do not lay off workers, provide concessional financing to hospitals seeking to enhance their capacity to provide care for Coronavirus infected individuals, facilitate the general public’s access to financial services, simplify payment procedures for exporters and importers, among other measures.

    According to the report, the stabilization efforts and regulatory measures yielded notable improvements during the first half of FY20.

    The current account deficit contracted to a six-year low, foreign exchange reserves increased, the primary budget recorded a surplus, and core inflation eased. Importantly, export-based manufacturing showed signs of traction and construction activities picked up, indicating that the economy was on the path of recovery.

    Progress under the IMF program remained on track and the credit rating agencies maintained their stable outlook for Pakistan during the review period.

    Further improvements will require deep structural reforms to put the economy on a firm path towards sustainable growth.

    In case of balance of payments, the report noted that the improvement in current account mostly stemmed from a reduction in the import bill with some contribution from export earnings. Depressed international commodity prices had partially offset the gains in export volumes offered by a competitive exchange rate.

    With the exception of the telecommunications sector, foreign direct investment (FDI) inflows were also about the same level as last year. The report emphasized that reforms needed to be prioritized to attract and sustain higher FDI inflows into the country.

    Regarding the fiscal sector, the report noted that the primary budget recorded a surplus, while the fiscal deficit was contained during H1-FY20 compared to the same period last year.

    This was due to a significant growth in revenues despite a slowdown in the economy and the compression in imports. The reversal of earlier tax concessions and implementation of new levies helped increase the revenue collection.

    Nonetheless, the overall revenue target was missed, highlighting the scope for greater efforts to broaden the tax base and increase documentation in the economy.

    The report further highlighted the challenges pertaining to the agriculture sector. The sector appears less resilient to challenges like constrained water availability and climate change.

    The cotton crop, in particular, was hit by unfavorable weather, pest attacks and low water availability. Though the prospects for the wheat crop and livestock are encouraging, the decline in cotton production is likely to undermine the agriculture sector’s performance in FY20.

    On the inflation front, the report noted that the inflationary pressures continued to build up throughout the first half of FY20. While the non-food-non-energy (NFNE) inflation exhibited stability amid subdued demand conditions in the economy, food inflation surged steeply in both the quarters.

    Given that the surge in inflationary pressures was mostly an outcome of supply disruptions, which are typically seasonal and temporary and core inflation did not rise by a commensurate amount, the SBP’s projections for the average headline inflation for FY20 remained broadly unchanged at 11-12 percent.

    This was one of the major reasons the Monetary Policy Committee decided to keep the policy rate unchanged during both its September and November meetings during the first half of FY20.

    To ensure that the stabilization measures lead to a sustainable growth path for the country, the report emphasizes that the ongoing efforts must be complemented with further structural reforms.

    In this regard, the Special Section of the report identifies the state of competition in the domestic economy as an area needing attention of the policymakers.

    It assesses the current state of competition in the country, and highlights the importance of competition in achieving economic growth and price stability.

    The section argues that the overall competitive environment in Pakistan has been unfavorable for productivity enhancement and growth. In this context, a rethinking is needed with respect to the regulatory structure of the economy.

    The role of the public sector should generally be limited to addressing market failures through structural reforms, and only providing broad institutional support to businesses.

    Where targeted interventions are inevitable to support activity in the presence of market failures, it may be ensured that these do not become entrenched.