January 10, 2020 (MLN): Gold prices slumped by Rs. 1,000 per tola on Friday, before settling at Rs. 89,500 per tola.
To recall, the price of gold had reached a peak of Rs. 93,400 per tola on January 6, 2020, amidst mounting political tensions between the United States and Iran.
Since then, the prices have come down by Rs. 3,900 per tola on account of ease in political tensions.
Copyright Mettis Link News
32070
May 20, 2022 (MLN): The State Bank of Pakistan (SBP) is scheduled to convene on May 23, 2022, wherein it is likely to increase the policy rate by 100 bps in the upcoming monetary policy statement.
The prospects of tighter monetary policy arise primarily from the movement in both primary and secondary market yields for government securities.
To infer the market expectations for monetary policy, the foremost thing to look at is the shape of the yield curve. On the PKRV front, it has been witnessed that since the last MPC meeting in April’22, yields have increased within the range of 203 bps to 332 bps as of May 19, 2022, for tenors 1M to 12M. For longer tenors 2Yrs to 20Yrs, the yields have soared within the range of 35 bps to 168 bps, hinting at the market’s expectations of another hike in the policy rate.
Further, as per the latest auction of T-bills on May 19, 2022, the cut-off yields for 3M, 6M and 12M have swelled by 170 bps, 145 bps, and 145 bps to currently stand at 14.5%, 14.7%, and 14.75% respectively, well above the prevailing policy rate of 12.25%. Moreover, in the recent T-bills auction, the majority of the participation was witnessed in 3M papers which indicates that investors are preferring to invest in the shortest tenor in anticipation of a rate hike.
On the KIBOR side, interbank rates since the last MPS have drastically increased within the range of 165 bps to 228 bps respectively for 1M, 3M, 6M, 9M and 1Y tenors as of May 19, 2022. At present, the real interest rate is at -1.15% whereas the gap between the interest rate and 6M KIBOR is at -2.59%, leaving ample room for further rate hikes.
The expectations of a sharp hike in policy rate further stem from a deteriorating outlook for inflation, rapidly slipping PKR, rising fiscal deficit amid huge petrol/diesel subsidy, dwindling FX reserves, and a crucial round of talks with the International Monetary Fund (IMF) which are currently underway, may push for further tightening.
Headline inflation which remained in double digits since Nov'21 is getting uncontrollable now, as it hit almost two years high of 13.4% in April’22, with pressure mainly coming from higher food and energy-related commodity prices such as oil, RLNG, and coal due to the Russia-Ukraine war.
As a result of continuous rise in energy-related commodity and food prices, the average food basket increased by 18% YoY, whereas energy prices were up by 38% YoY, combined with spillover effects, taking average inflation for 10MFY22 at 11% compared to 8.9% reported in FY21.
On the external front, the turbulence continues as the current account deficit increased massively to $13.8bn during 10MFY22 against $543bn during 10MFY21. This is primarily due to the huge import bills fueled by higher international commodity prices and strong aggregate demand owing to a recovery in GDP growth increasing the deficit. This week, Meanwhile, the government on Thursday decided to impose a blanket ban on the import of non-essential luxury items to redress current economic woes under the Comprehensive Economic Plan.
Similarly, on the fiscal side, the unbudgeted fuel subsidies and rising debt financing costs are squeezing the fiscal space of the government. In the 9MFY22, despite record tax collections, budget deficit stood at Rs2.56bn vs. Rs1.65bn seen in the same period last year. The said increase was mainly on account of Rs371bn increase in federal government subsidies, Rs244bn (66%) reduction in petroleum levy on retail fuels and Rs146bn increase in markup payments.
Further, since the last MPS in April, SBP’s FX reserves have plunged by $686mn or 7% to $10.2bn equivalent to 1.5 months of the import bill, mainly due to external debt repayments and settlement on a mining project. The dwindling FX reserves have put Pakistan’s currency under immense pressure, resulting in a sharp dip of Rs200 per dollar in the interbank market, depreciating by Rs11.82 since April 7, 2022.
Market participants expecting policy rate to increase to 13.25%
Based on the above scenarios, market consensus also seems to be pointing towards a sharp hike in policy rate as 9 out of 14 brokerage houses in a survey conducted by MG, expect SBP to increase the interest rate by 100 bps while 5 brokerage firms are expecting a hike in the range of 100-150 bps.
Policy Rate Projections for May'22 | ||
|---|---|---|
Brokerage House | Expectations | |
KASB Securities | hike of 100-150 bps | |
Abbasi and Company Pvt Ltd | hike of 100-150 bps | |
Insight Securities | hike of 100-150 bps | |
AKD Securities | hike of 150 bps | |
TSBL | hike of 125 bps | |
Optimus Capital | hike of 100 bps | |
Taurus Securities | hike of 100 bps | |
Arif Habib Limited | hike of 100 bps | |
WE Financial | hike of 100 bps | |
Sherman Securities | hike of 100 bps | |
JS Global | hike of 100 bps | |
Topline Securities | hike of 100 bps | |
Spectrum Securities | hike of 100 bps | |
Pearl Research | hike of 100 bps | |
Copyright Mettis Link News
May 20, 2022 (MLN): ICT Export Remittances including Telecommunication, Computer and Information Services for the period July 2021 to April 2022, have surged to $2.2billion at a growth rate of 29.29 % in comparison to $1.7 billion during the same period in FY 2020-21.
According to the Ministry of Information Technology and Telecommunication data, in April 2022, the ICT export remittances are $249 million at a growth rate of 29% when compared to $193 million reported for the month of April 2021.
However, in comparison to export remittances of $260 million in March 2022, the remittances in April 2022 are lower by $11 million.
The net exports for the period July 2021 to April 2022 during FY22 are $1.665 billion which is 75.75% of $2.198 billion in exports. Last year, for the same period the net exports were $1.274 billion which was 74.9% of $1.7 billion in ICT exports.
Copyright Mettis Link News
May 20, 2022 (MLN): The banking sector spread for the month of April 2022 increased by 35 basis points (bps) over the month which brings its latest value to 5.02% as compared to the prior month's spread of 4.67%, State Bank of Pakistan's monthly data released on weighted average lending & deposit rates showed today.
Similarly, compared to the same month last year, the spread has increased by 52bps as it stood at 4.5% in April 2021.
As per data, the lending rate for all banks jumped by 65bps MoM and 226bps YoY to stand at 10.26%. Meanwhile, the deposit rate clocked in at 5.24%, increased by 3bps over the month while improved by 171bps over the year in April 2022.
In addition, fresh lending rates stood at 11.87% during the month under review, up by 128bps MoM, while on yearly basis, it rose by 384bps. Fresh deposit rates increased by 68bps MoM and 250bps YoY to 5.78%.
Thus, fresh banking spread during April 2022 stood at 6.09%, depicting a growth of 6bps MoM and 139bps YoY.
Copyright Mettis Link New
May 20, 2022 (MLN): The State Bank of Pakistan (SBP), on Friday has ordered Authorized Dealer (ADs) to seek permission from Foreign Exchange Operations Department (FEOD) SBP-BSC before initiating transactions for import of goods.
The goods for which permission will be required include, Power generating machinery, other machinery, electrical machinery and apparatus, mobile phone (CKD), and motor cars (CKD).
As per the circular issued by SBP, the above condition will be effective immediately and shall be applicable for all import transactions initiated by Authorized Dealers through (i) issuance/ amendment of letter of credit; (ii) registration/ amendment of contract; (iii) making advance payment; (iv) authorizing transactions on open account or collections basis.
Moreover, it will not be applicable on import transactions initiated by the Authorized Dealers on or before the date of issuance of this circular letter.
As per SBP, the ADs may approach Director, FEOD, SBP-BSC, Head Office, Karachi, along with appropriate documents and its recommendation on a case-to-case basis
Authorized Dealers shall be required to suitably amend the importer’s bank profile in Pakistan Single Window to ensure that the aforementioned import transaction shall not be initiated on open account basis without prior permission from State Bank, the notice said.
Copyright Mettis Link News
May 20, 2022 (MLN): Ongoing storm of economic crisis- where the country is left with only 1.54 months cover for the import bill, economic managers being clueless and hesitant regarding unpopular decision making, has provided the maximum ground to the US dollar to beat the Pakistani rupee (PKR) by 7.6 rupees in the departed week as the currency settled week’s trade at PKR 200, compared to the previous week’s close of 192.53 per USD.
In today's session, the local unit was traded in a range of 1.4 rupees per USD showing an intraday high bid of 200.50 and an intraday low offer of 200, depreciating by 14 paisa by the end of the session.
The elevated demand for the dollar amid panic created by uncertain market conditions and delay in the IMF tranche has finally crossed the psychological mark of PKR 200 in yesterday’s session, which was termed by experts as “Black Day” in history.
In addition, the dollar hoarding, speculative elements and SBP’s silence have added more fuel to the fire.
Regarding IMF, Zafar Paracha, President of Exchange Companies Association of Pakistan said, “IMF has raised concerns over the subsidy on petroleum products given by Pakistani government and Pakistan side had agreed to roll back the subsidies, however, the relief package is still being provided.”
He also added, “It seems that financial assistance from Saudi Arabia and China is now conditional to the IMF’s allocation of $1bn to Pakistan.”
However, the talks with IMF have started during the outgoing week and if the talks remain in favour of Pakistan, the pressure from the exchange rate will be eased off.
Meanwhile, the government on Thursday decided to impose a blanket ban on the import of non-essential luxury items to redress current economic woes under the Comprehensive Economic Plan.
This plan has been formulated under which a fiscal management policy would be introduced to steer the country out of the current economic crisis. The plan would help reduce the country’s reliance on foreign debts
According to Minister for Information and Broadcasting Marriyum Aurangzeb, “The economic initiatives of the current government would have a swift impact on the foreign exchange reserves for the next two months and there would be an annual impact of around $6 billion.”
Analyst fraternity on the other hand is of the view that the government’s move will likely have an estimated saving of $100mn per month.
This development has potential benefits for local auto assemblers where prime beneficiaries would be INDU, PSMC, HCAR and LUCK. The ban on imported cars will likely increase localization and accelerate investments.
While the temporary ban on CBU mobile phones would save $27.5mn in a month which will surely curtail the current account deficit. Market experts believe that Airlink and Luck (Samsung) might gain from this ban.
From July’21 to date, the local unit has lost Rs42.59 against the USD. Similarly, the rupee fell by Rs23.62 in CYTD, with the month-to-date (MTD) position showing a decline of 7.22%, as per data compiled by Mettis Global.
During the last 52 weeks, PKR lost 23.38% against the greenback, reached its lowest at 200.14 today and touched its high of 153.22 on May 21, 2021.
Furthermore, the local unit has weakened by 11.77% since its high on July 02, 2021, against EUR while, it has dropped by 13.06% against GBP since its high on May 24, 2021.
In addition, the performance of PKR remained bleak against major currencies during the month to date as it weakened by 8.54%, 7.54%, 7.25%, 7.22%, 7.21%, and 6.58% against JPY, EUR, CHF, AED, SAR, and GBP, respectively.
.jpeg)
Within the open market, PKR was traded at 200/202.50 per USD.
Meanwhile, the currency lost 2.3 rupees to the Pound Sterling as the day's closing quote stood at PKR 249.91 per GBP, while the previous session closed at PKR 247.59 per GBP.
Similarly, PKR's value weakened by 1.8 rupees against EUR which closed at PKR 211.71 at the interbank today.
On another note, within the money market, the State Bank of Pakistan (SBP) conducted an Open Market Operation (OMO) in which it injected Rs3.4 trillion into the market for 7 days at 12.32 percent.
The overnight repo rate towards the close of the session was 12.25/12.50 percent, whereas the 1-week rate was 12.35/12.45 percent.
Copyright Mettis Link News
