KARACHI: Governor State Bank of Pakistan (SBP) Jameel Ahmad has said that Pakistan’s external sector has stabilised and with support of qualitative improvements in the external account the SBP has successfully doubled its FX reserves from $3.1 billion to $8 billion in a year despite the repayment of one billion dollar Eurobond.
According to a statement issued by the SBP, Governor SBP Jameel Ahmad met key international investors during multiple events organised by leading global banks and financial firms, including JP Morgan, Citibank and Jefferies, on the sidelines of the IMF-World Bank Spring Meetings in Washington DC.
During the meeting, Jameel Ahmad highlighted the widespread adoption of digital technologies to address gaps in access to financial services and to revolutionize the domestic payments system and hoped that these time-bound reforms are expected to put the economy on the path of sustainable economic growth.
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Governor SBP informed the participants about the substantial improvement in Pakistan’s macroeconomic outlook achieved over the past year as a result of a prudent monetary policy, backed adequately by fiscal consolidation and the beginning of the implementation of key structural reforms.
The Governor SBP shared that over the past year, inflation has declined sharply in Pakistan, reaching a two-year low of 20.7 percent in March 2024 from a peak of 38 percent in May 2023.
He explained that the deceleration in inflation is broad-based, reflecting the combined impact of monetary tightening, fiscal consolidation, ease in import supplies, improved agriculture output and base effect. More importantly, core inflation declined markedly, reaching 15.7 percent in March, after persistently staying above 20 percent throughout last year.
Ahmad informed the participants that the external sector has also stabilised, as reflected in the sharp reduction in the current account deficit (CAD) to $1 billion during Jul-Feb FY24 from $3.8 billion in the same period last year.
In addition to stabilisation policies, improved agriculture output has contributed to higher food exports, while lowering the import demand of agri commodities like wheat and cotton. Workers’ remittances have risen consistently since October 2023 on y/y basis, driven by incentives and regulatory measures to divert inflows towards formal channels.
These qualitative improvements in the external account have allowed the SBP to more than double its FX reserves from January 2023 ($3.1 billion) to around $8 billion on 12April2024 despite the repayment of a $1 billion Eurobond on the same day. At the same time, the SBP’s forward liabilities have also reduced significantly from US$5.7billion in January 2023 to US$ 3.4billion in February 2024.
Governor SBP stressed upon the improvement in the country’s external debt dynamics, with a reduction in the gross financing requirements due to sizable CAD contraction. Moreover, the maturity profile of external debt has also improved, with share of relatively costly short-term commercial loans declining while the share of long term concessional financing from multilateral agencies, coupled with support from bilateral partners, is rising.
Ahmad also noted a recent pickup in inflows from overseas Pakistanis via Roshan Digital Accounts and also by other foreign investors, on the back of strong performance in achieving the targets and benchmarks under the IMF SBA program. Going forward, the government is hopeful of signing a long term IMF program, which will facilitate additional external financing and the adoption of structural reforms to deal with longstanding issues in the economy.
The Governor also highlighted SBP’s efforts to provide a conducive macroeconomic environment for the private sector to invest in the economy. The SBP’s Strategic Plan 2028 aims to facilitate growth by achieving price and financial stability.
Reuters adds: State Bank of Pakistan (SBP) chief Jameel Ahmad said on Thursday that the deceleration in inflation in the South Asian nation was broad-based, reflecting the combined impact of monetary tightening and fiscal consolidation.
Jameel Ahmad was speaking to international investors on the sidelines of the IMF, World Bank spring meeting in Washington.
He said inflation had fallen sharply over the past year, reaching a two-year low of 20.7% in March 2024 from a peak of 38% in May 2023.
Other factors contributing to the deceleration include an easing of restrictions on imports, improved agricultural output and a more favourable base effect, when compared with last year.
More importantly there has also been a marked decline in core inflation to 15.7% percent in March, after persistently remaining above 20% throughout last year, he said.
Ahmad and Finance Minister Muhammad Aurangzeb are leading a delegation to the spring meetings and the finance minister met with IMF Managing Director Kristalina Georgieva on Wednesday.
Ahmad, however, told the investors that qualitative improvements in the external account had allowed the central bank to more than double its FX reserves from $3.1 billion in January 2023 to around $8 billion despite the repayment of a $1 billion Eurobond this month.
He said Pakistan was hopeful of signing a long-term IMF program, which will facilitate additional external financing and the adoption of structural reforms to deal with longstanding issues in the economy.
Copyright Business Recorder, 2024
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