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Pakistan ‘very comfortably’ placed to meet IMF targets, SBP chief assures global investors

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1 year ago

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  • Pakistan on-track to address structural weaknesses, says SBP chief. 
  • Hopeful of achieving sustainable economic growth in medium term.
  • Says stabilisation measures have started yielding results. 

MARRAKECH: State Bank of Pakistan (SBP) Governor Jameel Ahmad on Friday assured investors that the country is “very comfortably placed to meet” International Monetary Fund’s (IMF) targets for end-September, net international reserves (NIR) and net domestic assets (NDA).

The governor made the assurance during his meeting with key international investors during events organised by global banks, including Barclays, JP Morgan, Standard Bank, and Jefferies on the sidelines of the IMF-World Bank meetings in Marrakech, Morocco.

As per a State Bank press release, the investors were briefed about the recent macroeconomic developments, policy responses to current challenges, and the outlook of Pakistan’s economy, and also answered their questions.

The governor informed the investors that the “current policy mix is geared” to achieve stabilisation by addressing the “macroeconomic imbalances”. 

He stated that the SBP was among the first central banks that began to tighten monetary policy in the wake of the rising inflation globally. However, certain domestic challenges such as the 2022 floods had “complicated SBP’s efforts to bring down inflation”.

“Stabilisation measures have started yielding results. Inflation has come down to 31.4% in September 2023 after peaking at 38.0% in May 2023 and is expected to continue its downward trajectory over the coming months, whereas the external account has improved considerably and foreign exchange buffers are being built up,” the governor was quoted. 

He added that the central bank expects inflation to “come down significantly during the second half of this fiscal year”.

“Going forward, the Stand-By arrangement with the IMF is expected to support the ongoing policy efforts to stabilise the economy,” said the governor. 

He stated that the “foreign exchange buffers are improving with both build-up in reserves and reduction in forward foreign exchange liabilities”.

He explained that since January 2023, SBP’s foreign exchange reserves improved from a low of $3.1 billion to $7.6 billion as of the end of September 2023. The reserve build-up was largely supported by non-debt-creating inflows amid favourable market conditions.

“At the same time, SBP’s forward foreign exchange liabilities have declined and the forward book target of $4.2 billion for end-September 2023 agreed with the IMF has already been met by a wide margin. Similarly, SBP is also very comfortably placed to meet the other end-September IMF targets, including Net International Reserves (NIR) and Net Domestic Assets (NDA),” said the governor.

The governor also informed the investors that Pakistan is “on-track to address the longstanding structural weaknesses”, adding that with the support from multilateral and bilateral partners the country “would be able to achieve sustainable and inclusive economic growth” in the medium term.

Pakistan likely to receive next IMF tranche

Last week, a brokerage firm report had stated that Pakistan was likely to receive the next tranche of the $3 billion stand-by arrangement with the IMF even though it may miss a few deadlines.

Topline Securities said the country had met the targets for net international reserves, net domestic assets, and foreign currency swap/forward position as of the end of June 2023 but highlighted that Islamabad had missed the targets of the primary deficit, which measures the fiscal balance excluding interest payments, and for external public debt disbursements.

The report also said that Pakistan is yet to implement the gas price adjustment it had agreed with the global lender. The adjustment was a prior action for the completion of the second review of the program.

Pakistan got the first installment from the IMF in the amount of $1.2 billion in July after the Executive Board of the lender approved the bailout package to stabilise the country’s economy. 

Under the agreement, the remaining $1.8 billion from the IMF has to be disbursed in two tranches after reviews in November and February.

The latest IMF programme has set nine performance criteria, four indicative targets, and 10 structural benchmarks for the upcoming review.

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Dar chairs the CCOP meeting; Blue World’s bid offer of Rs.10 billion is rejected.

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2 days ago

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The Foreign Minister/Deputy Prime Minister chaired the Cabinet Committee on Privatization meeting.

Other committee members who attended the conference included the Federal Secretaries of several Divisions, the Ministers of Finance and Revenue, Industry and Food, Commerce, Power, and Privatization.

The CCOP took the PC Board’s recommendation into consideration and suggested that Blue World’s bid of 10 billion rupees for the sale of 60% of PIACL’s shares be rejected. The bid was rejected by the CCOP, who chose to follow the PC Board’s advice.

The government’s determination to sell out PIACL through government-to-government or privatization was reaffirmed by the CCOP.

The CCOP was pleased with the Aviation Division’s evaluation of PIACL’s sound financial standing.

Additionally, the CCOP established a committee, chaired by the Minister of State for Finance, to assess potential transaction possibilities for the privatization of the Roosevelt Hotel and the appropriate modes of adoption in light of existing legal rules.

Prior to its subsequent meeting, the CCOP also ordered that all difficulties be resolved and an agreement for the selling of services to an international hotel be concluded.

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The KSE-100 Index has surged by 790 points, resulting in an all-time peak for the stock exchange.

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The benchmark KSE-100 Index increased by 790 points, marking a new all-time high for the Pakistan Stock Exchange (PSX) at 94,982 points.

The record-breaking performance underscores a surge of optimism and investor confidence in the stock market.

As investors responded to favorable economic signals, the market experienced a significant increase of over 500 points in early trading. Later, the KSE-100 Index reached another record level of 94,786 points after adding 594 points to its upward trajectory.

This positive development comes as the State Bank of Pakistan’s (SBP) foreign exchange reserves saw an increase of $84 million, reaching $11.26 billion during the week ending November 8, according to data released by the central bank on Thursday.

This represents an increase of 0.75% from the previous week. In addition, the nation’s total liquid foreign reserves experienced a modest increase, increasing by $33.7 million or 0.21% week-on-week to $15.97 billion.

In contrast, commercial banks’ reserves experienced a decline of $50.3 million or 1.06%, ultimately settling at $4.71 billion.

Furthermore, the economic team of Pakistan has expressed confidence in the discussions with the International Monetary Fund (IMF). Minister of State for Finance Ali Pervaiz Malik, in an exclusive conversation with Samaa TV, claimed talks were moving in a positive direction.

Highlighting improvements in Pakistan’s economic conditions, Malik noted substantial progress over the past six months to a year. He emphasized that Pakistan’s current economic situation has seen significant enhancement, with a reduced current account deficit of only $100 million in the first quarter, a reflection of the government’s strategy to increase remittances and boost exports.

Malik shared that discussions with the IMF are primarily focused on external financing, and while there have been speculations about a potential mini-budget or an increase in the petroleum levy, he clarified that these are currently premature considerations.

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Positive IMF negotiations propel KSE-100 Index above 94,000 points

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3 days ago

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As a result of investors’ optimism about the reported progress in the continuing talks with the International Monetary Fund (IMF), the Pakistan Stock Exchange (PSX) experienced a robust surge.

The benchmark KSE-100 Index of the PSX, which tracks market sentiment, rose 713 points to a new record high of 94,068 points, breaking above the 94,000-point barrier, as the trading session began.

Early in the day, the stock market began its upward trajectory as the KSE-100 Index steadily rose, gaining 574 points to reach 93,932 points. A possible agreement with the International Monetary Fund (IMF) might lead to more fiscal stability and back Pakistan’s economic reforms, which is why investors are so optimistic about the country’s future.

Officials from the Federal Board of Revenue (FBR) informed the International Monetary Fund (IMF) on Wednesday that the government would not be introducing a mini-budget and would instead continue to aim to collect Rs12,970 billion in taxes each year.

In line with continuing discussions with the Fund, FBR sources revealed that petroleum goods will not be subject to the General Sales Tax (GST).

The fact that Pakistan’s tax-to-GDP ratio has increased from 8.8% to 10.3%, a 1.5% gain viewed as a favorable sign of Pakistan’s fiscal policies, has reportedly pleased the IMF, who has voiced satisfaction at Pakistan’s recent economic performance.

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