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SBP MPS Analyst Briefing Key Takeaways, (AKD Off the Analyst's Desk Dec 13, 2023)

SBP MPS Analyst Briefing Key Takeaways

State Bank of Pakistan (SBP) announced its monetary policy statement yesterday wherein policy rate was kept unchanged at 22%. The unchanged policy rate was in line with our expectation. Following the announcement, the SBP Governor made the following remarks in the analyst briefing:

 

• SBP expects inflation to ease in the second half of the current fiscal year, with revised targets for CPI inflation to be shared in the next MPC meeting (Previous target 20-22%).
• Reiterating commitment, SBP aims to maintain forward-looking real interest rates in a positive trajectory.
• On the external front, total external debt obligations for the year is US$24.6bn (US$20.7bn principal; US$3.9bn interest), of which, over US$5.4bn has been repaid (US$4.0bn principal; US$1.4bn interest).
• Out of the remaining US$19.2bn, US$12.4bn will be rolled over (US$9.3bn confirmed), leaving a net total remaining amount of US$4.3bn (principal) and US$2.5bn (interest payment) for the remaining 7 months.
• SBP governor emphasized that the anticipated IMF tranche of US$700mn in January will unlock inflows from multilateral partners. Even without these inflows, the SBP-held reserves (Current: US$7.0bn) are deemed sufficient to meet foreign obligations.
• SBP also expects its profits for the current fiscal year (FY24) to surpass last year's profits of PkR972bn.
• For the ongoing quarter, SBP anticipates meeting the requirements set by the IMF for net international reserves and Net Domestic Assets (NDA), even without the inflow of IMF tranche.
• IMF has projected gross FX reserves to close at US$9.0bn at the fiscal year-end, and revised estimates will be shared by the IMF after the next executive board meeting.
• In response to the query about establishing a minimum deposit rate for Islamic banks, the governor clarified that setting a fixed rate is not considerate as it goes against Shariah laws. However, they are in consultation with the Shariah board to find a solution that protects customer interests while aligning with Shariah laws.