State Bank of Pakistan (SBP) Governor Jameel Ahmad on Wednesday said the government’s move to buy back Market Treasury Bills (MTBs) will allow banks to increase private sector lending.
His comments come after the federal government on Monday conducted the buyback auction of MTBs and accepted bids amounted to Rs351 billion.
“The government financing requirement is very low, at the moment, because they have liquidity available, as a result of which they have initiated this buyback process,” Ahmad told media persons.
“I think this will have a positive impact on the market because the borrowing cost will reduce and other market dynamics will also improve, which will be a positive for the economy.
“The funds released from here will be used by banks for private sector lending,” he said.
The SBP governor informed the latest funding received from the IMF has increased the central bank’s forex reserves. “At present, the country’s reserves have reached $10.7 billion, which is equivalent to two months of exports,” said Jameel.
The IMF Executive Board approved the 37-month, $7-billion Extended Fund Facility for Pakistan last week. Following the approval, SBP on Friday received the first tranche of Special Drawing Rights (SDR) 760 million, equivalent to $1.03 billion, from the IMF.
The Pakistani authorities and the IMF team reached a staff-level agreement on the EFF in the amount equivalent to SDR 5,320 million (or about USD 7 billion) on July 12.
Meanwhile, the SBP chief said that the country’s import-related and other payment requirements are being easily met.
The SBP chief highlighted that several positive developments have occurred in the FX markets.
“The current level of reserves and liquidity position is good, and pending payments including dividends have also been cleared,” he said.
“At present, there is no pressure,” he maintained, adding that inflows under RDA and remittances have also increased considerably, “which has improved liquidity position in the FX market”.
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