April 30, 2024 (MLN): The country's external debt repayments for the remainder of the current fiscal year stand at a manageable sum of approximately $1.8 billion, the Governor of the State Bank of Pakistan (SBP) informed during the Post MPC Analyst Briefing held on Monday.
About foreign exchange reserves, he said that the SBP's foreign exchange reserves are anticipated to reach around $9bn right after the IMF's approval of $1.1bn, compared to $3bn in the same period last year.
The governor credited this improvement to a more advantageous maturity profile, marked by significant repayment of commercial loans and heightened borrowings from multilateral and bilateral partners.
"Our maturity profile has improved as we have repaid commercial loans from the Middle East and China. We've replaced these loans with multilateral options, given their longer-term nature," he added.
Despite the repayments, the SBP's foreign exchange reserves are projected to remain at this level, in line with agreements made with the Fund.
In addition, the governor highlighted that the SBP's profit transfer to the government will see a significant increase in the current fiscal year. This boost in profits is expected to exceed Rs2 trillion, compared to Rs0.9bn in the same period last year, narrowing the fiscal deficit.
Responding to a query about Gold reserves, he informed that the SBP strategically holds about $4.3bn in gold reserves as a component of its investment portfolio.
"Inflation is aligning with our expectations. Going forward, we anticipate inflation to reach the medium-term target of 5%-7% by September 2025, which is promising news." He further stated.
To note, the Monetary Policy Committee (MPC) of the Central Bank decided to keep the policy rate unchanged at 22% for the seventh consecutive meeting.
The decision came in line with the market expectations wherein the majority of market participants were in consensus on the rate pause.
The Committee noted that the macroeconomic stabilization measures are contributing to considerable improvement in both inflation and external position, amidst moderate economic recovery. However, the MPC viewed that the level of inflation is still high.
At the same time, global commodity prices appear to have bottomed out with resilient global growth. The recent geopolitical events have also added uncertainty about their outlook.
Moreover, the upcoming budgetary measures may have implications for the near-term inflation outlook.
In line with the MPC’s expectations, inflation has continued to moderate noticeably in H2-FY24. Headline inflation in March declined to 20.7% YoY from 23.1% in February. In the same period, core inflation fell significantly to 15.7% YoY from 18.1% in February.
Besides the coordinated tight monetary and fiscal policy response, other factors that have led to this favourable outcome include lower global commodity prices, improved food supplies and a high base effect. The Committee views inflation to continue to remain on a downward trajectory.
However, the Committee also noted that this inflation outlook is susceptible to risks emanating from the recent global oil price volatility along with the bottoming out of other commodity prices; the potential inflationary impact of resolution of circular debt in the energy sector; and tax rate-driven fiscal consolidation going forward.
Cognizant of these risks, the Committee assessed that it is prudent to continue with the current monetary policy stance at this stage, with significant positive real interest rates.
On the IMF front, right after this announcement of the Policy Rate, the Executive Board of IMF allowed an immediate disbursement of around $1.1 billion to Pakistan, bringing total disbursements under the arrangement to SDR 2.25bn or about $3bn.
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Posted on: 2024-04-30T10:47:59+05:00
