Overview of SBP Monetary Policy Statement
The State Bank of Pakistan (SBP) has decided to keep its policy rate unchanged at 22%, as announced in its recent monetary policy statement. This decision was revealed during the analyst briefing by the SBP Governor. Let’s delve into the key highlights from the briefing:
Inflation and Economic Outlook
- Inflation Decline: The inflation rate is on a downward trend, supported by tighter monetary and fiscal policies and falling global prices. However, geopolitical developments pose risks to commodity prices, including crude oil.
- Core Inflation: Core inflation has decreased below 20%, averaging 15.7% in March 2024, with both goods and services contributing to this decline.
- Economic Growth: Economic growth for FY24 is projected to align with SBP’s target of 2-3%, with improvements expected in FY25. Growth is driven by recoveries in the agricultural sector, particularly in major crops like rice, maize, wheat, and sugar.
Financial Resilience
- Reserve Quality Improvement: SBP’s forward swap liabilities have reduced from approximately US$6.0bn in January 2023 to under US$3.5bn as of February 2024, indicating improved quality of central bank reserves and external buffers.
- Revenue Collection: Revenue collection is on track, achieving a primary surplus of 1.8% of GDP during the first seven months of FY24, surpassing the full-year target.
- Foreign Exchange Reserves: Despite significant debt repayments, SBP’s foreign exchange reserves have remained stable, with an expected increase of US$1.0 billion by April 30th.
Other Key Points
- Debt Profile Improvement: Recent debt repayments (Eurobond and Commercial Loans) have improved the country’s maturity profile due to longer-term borrowings from multilateral/bilateral partners.
- External Repayments: For FY24, the total external repayments due were US$24.3bn, with a remaining principal of US$1.8bn, excluding expected debt rollovers.
- Gold Reserves: SBP holds strategic gold reserves of 2.0 million troy ounces valued at US$4.3bn.
- Profit Anticipation: SBP anticipates a profit of PkR2.0tn for FY24, significantly higher than PkR972bn in FY23, to be transferred to the government by year-end.
- Medium-Term Inflation Target: SBP aims for a medium-term inflation target of 5-7% by September 2025, with upcoming budget and IMF discussions shaping future decisions.
- Reserve Level Target: SBP has set an indicative target for its reserve level at US$9.1bn by the end of FY24.
The SBP remains vigilant about achieving its economic targets amidst evolving global and domestic conditions.
Disclaimer:
The information in this article is based on research by the AKD Research. All efforts have been made to ensure the data represented in this article is as per the research report. This report should not be considered investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment decisions.
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