SBP boosts transparency measures, eyes $13bn reserves by FY25

September 13, 2024 (MLN): In a move to improve transparency and curb speculation, the State Bank of Pakistan (SBP) will release three additional data sets on a half-yearly basis, according to Governor Jameel Ahmed.

Speaking at the post-MPC meeting analyst briefing, Governor Ahmed informed that these data sets will include the country's foreign exchange position projections, market interventions with a three-month lag, and the details of debt repayment.

Governor Ahmed also mentioned that, as of June 2024, the central bank’s intervention in the market stood at $573 million (net buying).

Moreover, the country’s foreign exchange reserves are projected to increase to $12bn by March 2025 and $13bn by the end of FY25.

The Governor also informed the participants regarding the half-yearly external debt repayments, which are projected at $14.1bn by March 2025, including rollovers of $8.3bn (net outflows of $5.8bn by March 2025).

The SBP has repaid $1.7bn in loans and successfully rolled over $2.3bn in debt payments during FY25YTD.

To manage the ongoing year’s external financing needs, SBP has also arranged over $2bn in external financing so far.

The financing gap for FY25 is projected at $26.2bn, including $4bn in interest and $22bn in principal.

Of this amount, $16.3bn is expected to be rolled over or refinanced, while $10bn will be repaid. Since July 2024, the SBP has settled $4bn, covering $2.3bn and $1.7bn in external obligations.

Regarding the SBP’s profitability, he stated that the central bank recorded a profit of Rs2.5 trillion in FY24 and is expected to disburse this amount as a dividend to the government in the coming days.

In response to a query about the IMF’s Board meeting and related concerns, he expressed optimism, stating that Pakistan expects the International Monetary Fund’s executive board to review its new $7bn loan program this month.

He attributed this optimism to the fact that the country has arranged over $2bn in financing and received assurances from lenders other than the IMF.

He mentioned that there is now no hurdle left to take Pakistan’s case to the board, as all required assurances and external financing have been arranged by the government.

Later that same evening, IMF Director of Communications Julia Kozek confirmed during a press briefing that the IMF Executive Board is set to meet on September 25 to review and potentially approve the $7bn Extended Fund Facility (EFF) for Pakistan.

In response to another query, the Governor clarified that the SBP is not targeting any specific real interest rate but has a medium-term target of 5-7%.

He noted that the country is now making progress after implementing IMF conditions.

As a result, macroeconomic indicators have improved, with the prolonged period of tight monetary policy successfully cooling inflation, creating room for the SBP to gradually lower interest rates.

At its meeting on Thursday, the MPC decided to cut the policy rate by 200 basis points to 17.5%, effective from September 13, 2024.

This calculated move reflects a cautious yet optimistic outlook, driven by a sharper-than-expected disinflation trend. This is attributed to favorable global conditions such as declining oil prices and delays in energy price hikes.

In addition, SBP’s FX reserves reached $9.5bn by September 6, despite weak inflows and continued debt repayments. Government securities' secondary market yields have also declined.

Business confidence and inflation expectations have improved, according to recent surveys, while consumer sentiment has slightly worsened. Additionally, FBR’s tax collection for July-August 2024 fell short of its target.

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