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SBP increases intertest rate by 125bps to 15pc

Acting Governor Dr Murtaza Syed says the "most important" objective behind the move is to control spiraling inflation

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SBP increases intertest rate by 125bps to 15pc
GNN Media: Representational Photo

Karachi: The State Bank of Pakistan Thursday increased the interest rate by 125 basis points (bps) to 15 per cent.

After chairing the monetary policy committee (MPC) on the policy rate, the central bank's Acting Governor Dr Murtaza Syed addressed a press conference, saying the "most important" objective behind the move was to control spiraling inflation.

He attributed the rise in inflation to global reasons, such as the Russia-Ukraine war, and domestic developments, including a "very high economic growth".

Syed said that while a high economic growth rate was usually a good development, Pakistan's economy was structured in a way that it would start facing problems if the rate was six per cent for two years in a row.

 Inflation had risen because of fiscal expansion, he added.

"The environment is very complex and uncertain. We have seen this kind of inflation globally after 50-60 years."

The acting governor, however, expressed the hope that the country would get past the phase of high inflation in the same way that it had been successful in combatting the coronavirus pandemic.

Syed said that inflation would remain between 18 to 20pc in the current fiscal year, however, the SBP would try to make sure that it did not rise beyond 20pc.

If the SBP had not raised the benchmark policy rate, it could have led to a worse situation — hyperinflation and more pressure on the currency, he said.

The central bank acting chief said economic growth was expected to come in at 3 to 4pc in the current fiscal year, which would reduce the risk of a further rise in inflation.

"The inflation number will remain high but we will try that it does not increase. We will try to control month-on-month [inflation] but the year-on-year [inflation] will unfortunately remain between 18 to 20pc."

He emphasised the need to control food prices. "While the monetary policy cannot control this, the agricultural output can be increased and bottlenecks in supply distribution can be addressed."

Meanwhile, SBP Deputy Governor Sima Kamal said the Monetary Policy Committee had decided that the Export Finance Scheme (EFS) and Long-Term Finance Facility (LTFF) rates would be 5pc less compared to the interest rate.

"We want to keep supporting the exporter ... this is a very important step," she said.

The central bank earlier raised the benchmark interest rate by 150 bps to 13.75pc in May.

Later in a statement, the SBP said Pakistan was facing a large negative income shock from high inflation and necessary but difficult increases in utility prices and taxes.

"Under the MPC’s baseline outlook, headline inflation is likely to remain elevated around current levels for much of FY23 before falling sharply to the 5-7 percent target range by the end of FY24, driven by tight policies, normalisation of global commodity prices, and beneficial base effects," the statement added.

It underlined that headline inflation rose significantly from 13.8pc in May to 21.3pc in June, the highest since 2008.

"The increase was broad-based—with energy, food and core inflation all rising significantly—and more than 80 percent of the items in the CPI basket experiencing inflation of above 6 percent."

The SBP noted the three encouraging developments — the passage of budget based on "strong fiscal consolidation, $2.3bn commercial loan from China and robust economic activity — were overshadown by global inflation and other factors.

The SBP said the the current account deficit rose to $1.4bn in May, on the back of lower exports and remittances partly due to the Eid holiday. "Based on PBS data, the trade deficit rose to $4.8bn in June, more than $1.7bn higher than its February low."

It said the the current account deficit was projected to narrow to around 3pc of GDP "as imports moderate with cooling growth, while exports and remittances remain relatively resilient".

The central bank noted that expected completion of the ongoing IMF review will catalyse important additional funding from external sources that will ensure that Pakistan’s external financing needs during FY23 were met.

For fiscal sector, the SBP said the fiscal stance in FY22 was unexpectedly expansionary, with the primary deficit estimated at 2.4pc of GDP, which was "double that of the previous year and more than thrice the budgeted primary deficit of 0.7pc of GDP".

The SBP said the monitoring committee will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability, and growth and will take appropriate action to safeguard them.

 

Pakistan

Pakistan, Denmark sign inter-governmental framework agreement

Interest-free loans will be extended for renewable energy, energy efficiency, and water supply and waste-water treatment sectors

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Pakistan, Denmark sign inter-governmental framework agreement

Islamabad: Minister for Economic Affairs Sardar Ayaz Sadiq has said that Pakistan and Denmark enjoy a friendly and cordial relationship, and there is a lot of potentials to enhance the relationship between both nations.

He was talking to Danish Ambassador, Lis Rosenholm in Islamabad after the signing of an inter-governmental framework agreement to enhance financial cooperation in the energy and water sector.

Under the agreement, interest-free loans will be extended for renewable energy, energy efficiency, and water supply and waste-water treatment sectors.

Sardar Ayaz Sadiq told the ambassador that efforts to revive bilateral economic and development cooperation are underway with Denmark, agreeing to provide budget support to the Government of Pakistan through Inter-Governmental Framework Agreement.  

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Regional

Death toll in Hyderabad gas leakage climbs to five

The injured were under treatment at a hospital in Karachi

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Death toll in Hyderabad gas leakage climbs to five

Hyderabad: The death toll from a gas leakage blast at Hyderabad’s Pathan Colony a few days ago climbed to 5 on Thursday.

According to the details, the incident took place a few days ago women forgot to turn off the gas at night and in the morning an explosion occurred when the stove was lit in the kitchen.

The injured were under treatment at a hospital in Karachi. 

Those who lost their lives in the incident were 65-year-old Ratan, 60-year-old Sawatri, their young daughter, and another person.

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Pakistan

President, PM express resolve to build an inclusive society in line with vision of Quaid-i-Azam

The Government of Pakistan had declared 11 August as National Minority Day in 2009.

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President, PM express resolve to build an inclusive society in line with vision of Quaid-i-Azam

Islamabad: President Dr. Arif Alvi and Prime Minister Muhammad Shehbaz Sharif have expressed the government's resolve to achieve the noble objective of building an inclusive society in line with the vision of Quaid-i-Azam Muhammad Ali Jinnah.

In their separate messages on the occasion of National Day of Minorities, they resolved to make all efforts to safeguard minorities' rights and work for their well-being as their rights have been enshrined in the Constitution.

The President lauded the role being played by minorities, especially in the fields of education, health, and social welfare.

He said 11th August is celebrated as Minorities' Day in Pakistan to acknowledge the invaluable contribution made by our minorities to the development of Pakistan and to reaffirm our commitment as a nation to safeguard their rights.

In his message, Prime Minister Muhammad Shehbaz Sharif said freedom of religion and sanctity of the person and properties of minorities have been statutorily formalized in our constitution.

He said National Day of Minorities serves to highlight the contributions that our non-Muslim Pakistani citizens are making to national development.  

Minister for Religious Affairs and Interfaith Harmony, Mufti Abdul Shakoor has said that Islam is a religion that respects humanity.

In his message on the occasion of National Minorities Day, he said according to the eternal teachings of Islam, there is no rule against the basic principles of humanity.

The Minister said that Islam never encourages forced conversion of followers of other religions.

The Prime Minister reaffirmed the coalition government's resolve for the betterment and welfare of our minorities and their fullest inclusion in the national life and development.

National Minority Day is observed today to commemorate the contribution of minorities in the progress of Pakistan. 

On August 11, the day is observed every year to recall the vision of Quaid-e-Azam Mohammad Ali Jinnah and to reaffirm the commitment that despite belonging to different faiths we are one nation.

The Government of Pakistan had declared 11 August as National Minority Day in 2009.

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