Mettis Global News
Mettis Global News
Mettis Global News
Mettis Global News

MPS Preview: High for Longer

SBP expects another $5bn rollover, debt in check, growth ahead

SBP Governor highlights external account strength
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January 30, 2024 (MLN): Riding the wave of positive news in the economic arena, the State Bank of Pakistan (SBP) is now banking on another $5 billion rollover from friendly countries. Despite an anticipated $10bn external outflow, the bank is left holding the bag with a net repayable amount of $5bn for the rest of FY24.

This was highlighted by Mr Jameel Ahmed, Governor of the SBP, during the post-Monetary Policy Committee (MPC) Analyst Briefing on Monday.

"The total external financing requirement for FY24 was $24.5 billion, of which most of the amount has already been paid or rolled over," he added.

With around $5bn in repayment, the country boasts over $8bn in foreign exchange reserves, showcasing a notable improvement in the country's external debt profile in recent times, mainly due to the repayment of short-term commercial debt.

Meanwhile, these repayments have been accompanied by inflows from multilateral institutions, which are long-term.

Another breath of fresh air was enjoyed by the participants when they were informed regarding the dividend repatriation. As of September 2023, out of the total requests for dividend repatriation, only $124 million is pending, which will soon be paid. $356mn was pending, out of which the dividends of banks amounted to $232mn.

Adding to the positive outlook, stabilization policies are effectively working, with results evident on both fiscal and monetary fronts. Responding to a query, Governor SBP stated that the latest survey indicates improvements in capacity across food, textile, pharmaceutical, electronics, and fertilizer industries.

Regarding real interest rates, the MPC statement reads, “The real interest rate remained significantly positive on a 12-month forward-looking basis” while in reality, real interest rates are not positive, Jameel Ahmed acknowledged and clarified that they are "Relatively Positive."

Addressing concerns about profit rates charged by Islamic Banks, Mr Jameel clarified, "There are no negotiations ongoing with Islamic banks as we are developing a methodology for profit rates. However, we will ensure that profit rates are in line with Shariah compliance."

While confirming the news flows about the issuance of new currency notes, the governor said, the Central Bank has decided to issue new currency notes to combat counterfeit currency proliferation.

Unlike previous practices, these notes will be printed under International Security Futures, ensuring enhanced protection against forgery, he said while having a talk with journalists on the sidelines of the press conference right after the MPC meeting.

The forthcoming notes will boast distinctive colours, serial numbers, and designs, coupled with cutting-edge security features.

On Monday, the MPC held interest rates steady for the fifth consecutive time, reflecting market sentiment.

Despite expectations of declining inflation, regular adjustments in energy prices decelerated this decline, while non-energy inflation continued to moderate.

The committee also took recent geopolitical tensions and adjustments in energy prices into account, emphasizing the need to maintain a tight monetary policy stance alongside fiscal consolidation to achieve the inflation target of 5-7% by September 2025.

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Posted on: 2024-01-30T12:26:14+05:00