Sign in Subscribe
  • E-Papers
    • Profit Magazine
    • Pakistan Today
  • Headlines
  • Featured
  • Opinion
    • Comment
    • Editorial
  • Tech
    • Artificial Intelligence
  • World
  • Satire
Sign in
Welcome!Log into your account
Forgot your password?
Create an account
Sign up
Welcome!Register for an account
A password will be e-mailed to you.
Password recovery
Recover your password
Search
Sign inSubscribe
Profit Profit by Pakistan Today
Profit Profit
  • E-Papers
    • Profit Magazine
    • Pakistan Today
  • Headlines
    • Headlines

      SBP to gauge policy rate cuts on flood impact and IMF…

      Headlines

      World Bank projects Pakistan’s GDP growth at 2.6% for FY2025-26

      Headlines

      HUBCO eyes BYD EV assembly in 2026, aluminium smelter and SPM…

      Headlines

      KSE-100 sheds 1,238 points as volatility rattles investors:report

      Headlines

      Rupee strengthens slightly as Dollar index gains, Yen hits two-month low

  • Featured
    • Cover story

      Why P&G is leaving Pakistan

      Consumer Goods

      Tepid growth for Colgate Palmolive Pakistan

      Editor’s picks

      Trump tariffs expected to boost PEL’s exports to the US

      Editor’s picks

      Pension Reckoning

      Energy

      One more round of circular debt restructuring and why it still…

  • Opinion
    • AllCommentEditorial
      Comment

      Pakistan’s high-stakes crypto experiment

      Comment

      Do Pakistani businesses know how to diversify their business portfolios?

      Comment

      Pakistan’s tax myth: It isn’t the people, its the government

      Comment

      Market maker or market wrecker?

  • Tech
    • AllArtificial Intelligence
      Artificial Intelligence

      Experts project 7–12% GDP growth, 1 million jobs from Pakistan’s new…

      Headlines

      Air Link announces expansion plans with new production facility at Sundar…

      Tech

      OpenAI partners with Etsy, Shopify on ChatGPT payment checkout

      Headlines

      Islamabad IT Park to create 10,000 jobs, completion expected by December…

  • World
  • Satire

SBP raises key interest rate by 150 basis points to 10%

Import growth declined to 5.8% during the first four months (July-October) of FY19 from 26.3% in the same period of last year, indicating an effect of recent tightening measures.

By
Mohammad Farooq
-
30/11/2018
0
1658
Facebook
Twitter
Linkedin
WhatsApp
Email

    LAHORE: The State Bank of Pakistan on Saturday raised the key interest rate to 10% for the next two months, an increase of 150 basis points effective from December 3rd.

    This is the fifth rise in the key interest rate since the beginning of 2018 and shows an increase in inflationary pressure and current account deficit are impacting the country’s economy.

    In January, the central bank had raised the key interest rate by 25 basis points and was again increased by 50 basis points in May to 6.5%, followed by a 100 basis points rise in July to 7.5% and 100 basis points in September to 8.5%.

    A press release issued by the central bank said the economic data released since the last Monetary Policy Committee (MPC) meeting in September indicated that the positive impact of recent stabilization measures had started to bear fruit gradually.

    Especially, the current account is exhibiting early signs of improvement, said SBP. But it cautioned that near-term challenges to Pakistan’s economy continue to linger with increasing inflation, rising fiscal deficit and low foreign exchange reserves.

    The central bank stated taking recent large-scale manufacturing data into consideration, economic activity is expected to exhibit a noteworthy moderation during the current financial year 2018-19, indicating the short-term cost of achieving macroeconomic stability.

    Moreover, SBP said the impact of the cumulative increase of 275 basis points since January this year and other policy measures would likely rein in domestic demand in current financial year.

    “Initial estimates for major crops, except wheat, are expected to fall short of levels achieved in the last year. The slowdown in commodity producing sectors is expected to limit the expansion in the services sector as well. In this backdrop, SBP projects real GDP growth for FY19 at slightly above 4%,” said the central bank.

    Mentioning about the external front, the central bank shared import growth had declined to 5.8% during first four months (July-October) of FY19 from 26.3% in same period of last year, indicating an effect of recent tightening measures.

    It highlighted this current growth in imports was largely due to a rise in oil import bill due to higher global oil prices.

    As per SBP, non-oil imports fell by 4% during July-October FY19 and due to a continued rise in exports and workers’ remittances, narrowed the external current account deficit to $4.8 billion compared to $5.1 billion in SPLY, a net improvement of 4.6%.

    However, the central bank observed despite these developments, its net liquid foreign exchange reserves remain under stress falling to $8.1 billion as of 23rd November 2018 compared to $9.8 billion at end of FY18.

    Moving forth, the central bank there is an expectation of getting higher foreign inflows from official and private sources during the 2nd half of FY19 and the deferred oil payments facility would be available to the market beginning January 2019.

    “The projected decrease in the current account deficit, that could be further supported by the recent decline in international oil prices will instil confidence in the foreign exchange market.

    These developments would help reduce pressures on its net liquid foreign exchange reserves, said SBP.

    The average headline CPI inflation during July-October FY19 has risen to 5.9% compared to 3.5% in same period of FY18, according to SBP.

    Furthermore, mentioning core inflation the central bank said this trend was even more pronounced which highlighted growing inflationary pressures in the economy and a disaggregated analysis discloses this is due to both, demand and supply-side factors.

    Explaining these developments, the central bank forecast average headline CPI inflation for FY19 between 6.5 to 7.5%, over the annual target of 6%.

    It observed the recent reduction in global oil prices could likely play a positive role in reining in the existing inflation trajectory and the risk presently remain tilted towards the downside.

    The central bank stated during first 4.5 months of FY19, statistics exhibit that almost all liquidity in the banking system is generated via a rise in Net Domestic Assets (NDA), as the Net Foreign Assets continued to fall.

    “Besides the increase in budgetary borrowings from SBP, relatively higher credit flows to the private sector have been the major contributors to an increase in NDA.

    Despite contractionary monetary conditions, an increase in working capital needs due to capacity additions in the last three years and recent substantial increases in input prices, are the main reasons behind relatively higher credit flows to the private sector,” said SBP.

    Mentioning about the country’s recurrent balance of payment challenges in the medium-term, the MPC believes, “with the exchange rate reflecting a demand-supply gap in the foreign exchange market, the adoption of a flexible inflation targeting framework will help anchor inflation expectations;  improving productivity and competitiveness of exports will have to play a prominent role to reduce the external trade deficit; and the fiscal policy will have to be proactive and play a supportive role to generate conditions for a sustainable growth path.”

     

    • TAGS
    • current account deficit
    • fiscal deficit
    • foreign exchange reserves
    • Global Oil Prices
    • Interest Rate Hike
    • Monetary Policy
    • SBP Monetary Policy Committee
    • State Bank of Pakistan (SBP)
    Facebook
    Twitter
    Linkedin
    WhatsApp
    Email
      Mohammad Farooq
      The author is an Assistant News Editor at Profit by Pakistan Today. His works have been published in Dawn, Express Tribune, LiveMint India, Huffingtonpost India and The News on Sunday. He tweets @MohammadFarooq_

      RELATED ARTICLESMORE FROM AUTHOR

      Headlines

      SBP-held reserves decrease by $74mn due to external debt repayments

      Headlines

      SBP sees uptick of $14.4mn in foreign reserves 

      Headlines

      Pakistan’s forex reserves increase by $4mn to $13.4bn

      Whatsapp Newsletter
      Email Newsletter News Tips
      Profit by Pakistan Today
      Publishing Editor: Babar Nizami -- Editor Multimedia: Umar Aziz Khan -- Senior Editor: Abdullah Niazi -- Editorial Consultant: Ahtasam Ahmad -- Business Reporters: Taimoor Hassan | Shahab Omer l Zain Naeem | Shahnawaz Ali | Ghulam Abbass | Ahmad Ahmadani | Aziz Buneri -- Sub-Editor: Saddam Hussain -- Video Producer: Talha Farooqi -- Director Marketing : Mudassir Alam | Regional Heads of Marketing: Agha Anwer (Khi) | Kamal Rizvi (Lhe) | Malik Israr (Isb ) -- Manager Subscriptions: Irfan Farooq -- Pakistan’s #1 business magazine - your go-to source for business, economic and financial news.
      Contact us: [email protected]
      • Privacy policy
      Copyright © 2025. Pakistan Today. All Rights Reserved.