SBP surpasses IMF targets, stays on track for June 2025

March 11, 2025 (MLN): The State Bank of Pakistan (SBP) has successfully met the IMF's Net International Reserves (NIR) target for December 2024 by a wide margin and remains on track to achieve the June 2025 target, Governor Jameel Ahmed revealed during the post-Monetary Policy Committee (MPC) analyst briefing on Tuesday.

Instilling confidence in the country’s economic direction, he also informed that all IMF targets for December 2024 have been successfully met. He also expressed optimism about achieving the upcoming June 2025 targets.

During the briefing, the governor also provided an update on Pakistan’s external debt obligations for the remainder of FY25. Approximately $3 billion in repayments are due in the remaining period of FY25 after accounting for rollovers and refinancing.

The total debt repayment for the fiscal year stands at $26bn. This includes a principal repayment of $21.9bn and an interest payment of $4.1bn. Of this amount, $16.2bn is expected to be managed through rollovers or repayments, with $9.5bn already rolled over. So far, the country has repaid nearly $7bn.

The expected external inflows planned in the last few months are likely to materialize in Q4 FY25, with some inflows contingent on the successful completion of the next IMF review.

Responding to a question regarding the Rs3 million cap on auto financing, the central bank stated that the existing regulatory framework will continue for now. However, the situation will be reviewed in the future based on evolving economic conditions.

In response to a query about the increase in Open Market Operations (OMO), the governor clarified that the recent increase in OMO was attributed to a seasonal rise in cash circulation during Ramadan and elevated borrowing by the SBP from commercial banks amid lower external financing.

He also assured that the situation is expected to stabilize as external inflows materialize.

On external borrowing, he stated that the central bank has refrained from acquiring external borrowings in recent months to negotiate more favorable terms. The governor indicated that developments on this front are expected in the coming months.

He also clarified that there has been no real increase in non-performing loans (NPLs) for small and medium enterprises (SMEs). Instead, the reported changes stem from a reclassification impact. The overall infection ratios remain within healthy levels, well above regulatory requirements.

On the question on policy rate decision, he responded that while inflation remains a key determinant of the policy rate but the committee considers several other factors, including external accounts, reserve levels, and exchange rate movements, before making interest rate decisions.

He also noted that though inflation is declining, core inflation remains sticky. Additionally, imports have increased, but the bill remained manageable as global prices did not rise significantly.

The current account remains within the ±0.5% of GDP range, supported by strong remittances which increased by 38.6% YoY to $3.1bn in February 2025.

The SBP held an analyst briefing immediately after announcing the policy rate decision wherein the Monetary Policy Committee (MPC) kept the policy rate unchanged at 12%, effective March 11, 2025, in contrast with market expectations.

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