PakStox Outlook

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) reduced the policy rate by 200 basis points to 13%, effective December 17, 2024. This decision reflects easing inflation and improved economic growth prospects while maintaining a balance between inflation stability and sustainable growth. Inflation Headline Inflation declined to 4.9% in November 2024 due to lower food inflation and the fading impact of gas tariff hikes from November 2023. Core Inflation remains sticky at 9.7%, with volatile inflation expectations. Inflation for FY25 is expected to average well below the earlier forecast of 11.5-13.5%, though risks remain (e.g., revenue measures, food inflation, global prices). Economic Growth Growth prospects have improved, with real GDP growth for FY25 projected in the upper half of the 2.5-3.5% range. Industrial and agricultural activity is gaining momentum, supported by better-than-expected cotton arrivals and strong performance in manufacturing sectors like te...

The Monetary Policy Committee (MPC) reduced the policy rate by 250 basis points to 15%, effective November 5, 2024. This decision follows a faster-than-anticipated decline in inflation, aided by lower food inflation, stable oil prices, and no expected adjustments in gas tariffs and Petroleum Development Levy (PDL) rates. This marks the fourth consecutive rate cut since early June this year, after maintaining a steep policy rate of 22% for a year. The Monetary Policy Statement notes that; IMF Program: The new IMF Extended Fund Facility (EFF) approval has improved external inflows and reduced uncertainty. Market Yields and Inflation: Secondary market yields and the Karachi Interbank Offered Rate (KIBOR) have dropped, and October surveys showed improved consumer and business confidence alongside lower inflation expectations. Fiscal Challenges: The government’s tax collection fell short of targets in the first quarter of FY25, though non-tax revenues, boosted by SBP profits, supported fisc...

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) reduced the policy rate by 200 basis points to 17.5%, citing a faster-than-expected decline in both headline and core inflation due to delayed energy price hikes and favorable global oil and food prices. This marks the third consecutive rate cut after maintaining a steep policy rate of 22% for a year. Key developments include falling global oil prices, stable foreign exchange reserves of $9.5 billion, improved inflation expectations, and declining government security yields. However, the agricultural sector faces challenges, particularly in cotton production. The MPC expects real GDP growth for FY25 to remain between 2.5% and 3.5%. Workers' remittances and export earnings have improved, while the current account deficit is contained within 0-1% of GDP. Fiscal consolidation has improved Pakistan's debt-to-GDP ratio, falling to 67.2%. However, to meet fiscal targets, tax collection must increase significantly...

The State Bank of Pakistan (SBP) has further eased monetary policy, reducing its policy rate by 100 basis points to 19.5% in its meeting today. This marks the second consecutive rate cut after maintaining a steep rate of 22% for a year. The decision comes amid a persistent decline in the Kibor below the 20% mark for the past month. The SBP had previously lowered the policy rate by 150 basis points on June 10, 2024. This move is expected to stimulate economic activity by reducing borrowing costs for businesses and individuals. However, the central bank will continue to closely monitor inflation to ensure it remains within the target range. https://www.sbp.org.pk/m_policy/2024/MPS-Jul-2024-Eng.pdf Key Points of Monetary Policy Statement: Inflation: Inflation is slightly better than anticipated in June 2024, and the impact of the FY25 budgetary measures is in line with expectations. External Account: The external account has improved, with the current account deficit narrowing sharply i...

At last, the SBP has cut the policy rate by 150 bps to 20.5% after maintaining it at 22% for seven MPC meetings since June last year. This should exert downward pressure on inflation, provided that a resurgence in demand does not put pressure on the exchange rate. The KIBOR had been inching down for weeks and fell below 21% last week. The stock market should also react positively to this. The statement of the MPC notes….”At the same time, the MPC viewed some upside risks to the near-term inflation outlook associated with the upcoming budgetary measures and uncertainty regarding future energy price adjustments.” In our opinion, this rate cut needs to be accompanied by other structural changes at the public finance level. Otherwise, except for some possible external factors such as a decline in international oil prices, there will be no support at the national level for a sustained decline in interest rates. The policy rate remaining above 20% primarily reflects a breakdown in the manage...

The Monetary Policy Committee (MPC) decided to keep the policy rate unchanged, at 22 percent. The Monetary Policy Statement, noted, that; The economic recovery has been moderate, and the level of inflation is still high. And, the upcoming budgetary measures may have implications for the near-term inflation outlook. Meaning it could worsen, as IMF conditions will only curtail demand and increase inflation further. The interest payments have increased due to high debt levels and the government’s reliance on expensive domestic borrowing. As a result, the overall deficit increased to 2.6 percent of GDP during July–January FY24 from 2.3 percent in the same period last year. Uncontrolled government expenditure stands as the single greatest challenge to our economic and public financial health. Without a demonstrable commitment to fiscal discipline, the economic outlook will continue to deteriorate. The committee also noted that this inflation outlook is susceptible to risks emanating from th...

The upcoming monetary policy meeting of the Pakistan central bank is largely expected to keep the policy rate unchanged at its elevated level. It will be a long streak at that if kept unchanged. But if the central bank does make a cut in the policy rate, even a nominal one, that will substantially fuel this market rally. In my opinion, any rate cut would be at odds with the data stream and would not be taken as a sign of something fundamentally sound by the financial circles. All ills that ail us are still there. The structural issues in our economic and public finances persist, and the only thing that has changed is that the 'default' word is no longer associated with our external obligations. In addition, the positive tone by the IMF is also encouraging, beyond that, nothing solid. Our public finances and resources to meet our external obligations, together with the government's development expenditure, have always been reliant on external resources or space provided by e...

Monetary Policy Committee (MPC) of the State Bank of Pakistan in its meeting of 18 Mar 2024, decided to hold the line on interest rates.  Here's a breakdown of their decision: Interest Rate Unchanged: The MPC kept the policy rate at 22%. Reasoning: Inflation is starting to go down as expected. However, inflation is still high and could rise again due to people expecting high prices. Goal: Bring inflation down to 5-7% by September 2025. Conditions: This depends on the government controlling spending and getting expected money from outside Pakistan. Overall, the MPC is being cautious by keeping interest rates high to fight inflation. They're hoping this, along with government actions, will bring prices under control. Download MPC Statement

At its meeting today, the Monetary Policy Committee (MPC) decided to increase the policy rate by 100 basis points to 21 percent. The MPC noted that inflation in March 2023 rose further to 35.4 percent, and is expected to remain high in the near term. Read MPC Statement. In its previous meeting held on 2nd Mar 2023, the rate was hiked by 300bps to 20%.

In today's emergent meeting the Monetary Policy Committee (MPC) of The State Bank of Pakistan increased Policy rate by 300bps to 20%. Taking it to its highest ever. Also, today, the exchange rate deteriorated further and Pak-Rupee declined a massive 6.6% to Rs. 285 to a dollar.  And despite meeting the conditions, the IMF deal remains elusive as the IMF management continuously shifts goal posts for Pakistan. The market now shows total lack of confidence in policy measures.  Indicating worsening situation MPC stated that the recent fiscal adjustments and exchange rate depreciation have led to a significant deterioration in the near term inflation outlook and a further upward drift in inflation expectations. MPC candidly observed that despite recent improvement in CAD, scheduled debt repayments and a decline in financial inflows amid rising global interest rates and domestic uncertainties, continue to exert pressure on FX reserves and the exchange rate.  The statement cou...