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SBP Post - MPS Analyst Briefing Key Takeaways, (AKD Off the Analyst's Desk Jan 29, 2024)

The State Bank of Pakistan (SBP) announced its monetary policy statement today wherein policy rate was kept unchanged at 22%.
Following the announcement, the SBP Governor made the following remarks in the analyst briefing: 
 Core inflation remains on a downward trajectory (barring a spike in Dec’23), where-in significant spikes in energy prices are major 
reasons for elevated NCPI levels during recent months. SBP remains confident about real interest rate remaining positive on a 12-
month forward basis. 
 SBP projects country’s GDP to grow between 2-3%YoY during FY24E, with agricultural sector (majorly cotton and wheat) to remain 
the driving force. Leading indicators for Rabi season show promising outlook, however risk of lesser rainfall remains. 
 LSM growth is expected to return to positive trajectory by 2HFY24E, with central bank’s estimates depicting industry capacity utilizations improving during recent months. 
 SBP expects CAD to land between 0.5%-1.5% of the GDP, with expectations leaning towards the lower band. Export volumes (both 
textiles and non-textiles) seem to be on a recovery path. 
 Gross financing needs as per the IMF have shrunk significantly, with amortization requirements standing at 5.5% of GDP for FY24 
(vs. 6.0% in FY23). The year started with total US$24.5bn in external repayments due for FY24, where-in current position of total 
repayment stands at US$10bn, as the rest has either already been repaid or rolled over. SBP expects additional US$5bn of the remaining balance to be rolled over as well.
 With regards to monetary aggregates, SBP noted composition of money supply is improving with currency in circulation in downward trajectory, while seasonal spikes in deposit base being witnessed as well. M2 has grown by 12% during CY23 (vs. 22% in 
CY22). Chairman SBP commented that data will begin reflecting authority’s fiscal consolidation stance more clearly as time goes by. 
 SBP commented on PBS’s peculiar gas price hike calculation methodology for inflation estimates, where-in previously, only the 
variable component of gas prices was used in these calculations. However, the method now includes fixed charges in addition to 
the base price. 
 SBP has decided to renew currency notes of all denominations, introducing new designs and enhanced security features, aligning 
with global best practices.
 SBP is in the process of developing a new methodology for determining profit rates offered by Islamic banks. Central bank will ensure any decision to be taken will strictly be in compliance with Shariah principles.