May 17, 2020 (MLN): The highlights of the important economic and business events witnessed during the last week are in order to become acquainted with the recent developments in Pakistan’s economic and public policy.
On Friday, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) in its meeting held on May 15, 2020 in Karachi, decided to reduce the Policy Rate by 100 Basis Points to 8 percent.
Meanwhile, the Ministry of Finance, in a statement on Friday, said that the rating review conducted by Moody’s Investor Service on 14th May 2020 does not downgrade Pakistan’s B3 rating as Moody’s Investor Service has only placed the current rating under review for downgrade in case the G-20 Covid-19 Debt Service Suspension Initiative (G-20 DSSI) extends to private-sector creditors. The action is, therefore, not Pakistan specific and is in line with Moody’s global approach to place under review for downgrade all sovereigns availing the G-20 DSSI.
Also, the State Bank of Pakistan on Friday said that the placement of Pakistan’s sovereign rating under review by Moody's was not in any way because of the country’s fundamentals, policy settings or outlook, all of which are viewed in very complimentary terms by the rating agency.
On Thursday, Advisor to Prime Minister on Finance and Revenue, Dr. Abdul Hafeez Shaikh said with the current projections of negative 1.5 GDP growth rate owing to COVID-19 pandemic impact, the country’s economy would turn around to witness 2 percent growth in upcoming fiscal year (2020-21).
On Wednesday, the State Bank of Pakistan (SBP) announced plans to issue Market Treasury Bills (MTB), Pakistan Investment Bonds (PIB) and Ijara Sukuk (GIS) worth Rs. 3.025 trillion during May – July 2020.
The same day, a development regarding constructions of dams was witnessed as an agreement worth Rs. 442 Billion with a Joint Venture namely Power China-FWO was signed today for construction of diversion system, main dam, access bridge and 21 MW-Tangir Hydropower Project.
Another mammoth development was witnessed on the said day as the Economic Coordination Committee (ECC) of the Cabinet approved a multi-billion agriculture package to provide the farmers subsidy on fertilizers, reduction in bank mark-up on agriculture loans, subsidy on cotton seed and white fly pesticides and sales tax subsidy on locally manufactured tractors.
On the upside, Morgan Stanley Capital International (MSCI), a leading provider of research-based indexes and analytics, announced the results of the May 2020 Semi-Annual Index Review for MSCI Equity Indexes including MSCI Global Standard Index and MSCI Global Small Cap, as per which Pakistan’s all three stocks including OGDC, MCB and HBL retained their position in MSCI standard index.
On Tuesday, the federal government constituted the 10th National Finance Commission (NFC) with effect from April 23, 2020, to ensure the just distribution of resources of the federal divisible pool among the centre and the provinces.
Besides, Pakistan and the International Monetary Fund (IMF) are trying their very best to ensure that the outcome of the second review of the $6 billion loan program turns out positive as Bloomberg on Monday reported that the virtual talks are guided by Pakistan’s renewed commitment to implement the policies and reforms and if Pakistan manages to convince IMF of its performance, it will receive around $450 million by the end of the talks.
On Monday, the Pakistan Pharmaceutical Manufacturers’ Association (PPMA) warned the federal government that any decision to discontinue import of raw material of medicines from India will weaken the country’s ability to fight the coronavirus.
On the downside, the findings of the Dun & Bradstreet's Business Optimism Index (BOI) for the first quarter of 2020 shows that enforcement of the Covid-19 lockdown in the third week of March had only intensified the deterioration in the business sentiments sharply and sped up the shift from optimism to pessimism.
Furthermore, the Advisor to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh said that $1.8 bn due in debt servicing to G-20 countries till December 2020 is under the process of rescheduling. Pakistan is not going for any commercial loan rescheduling until now, said the Adviser.
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