KARACHI: Pakistan’s central bank on Thursday further slashed key policy rate by 100 basis points to 7 percent citing continued economic slowdown and increasing downside risk to country’s growth.
The central bank’s move to cut the interest rates comes in an unscheduled meeting of Monetary Policy Committee which has so far slashed the key interest rate by 6.25 percent from 13.25 percent since March 17, 2020.
“The decision reflected the MPC’s (Monetary Policy Committee) view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased,” the State Bank of Pakistan (SBP) said.
The SBP said that priority of monetary policy had appropriately shifted toward supporting growth and employment during these challenging times.
“The MPC re-asserted its commitment to supporting households and businesses through the Covid-19 crisis and minimizing damage to the economy. In this context, the MPC felt that from a risk management point of view, a prompt response to downside risks to growth was called for given the improved inflation outlook,” the statement read.
The central bank noted that with approximately Rs. 3.3 trillion worth of loans due to be re-priced by early July 2020, this was an opportune moment to take action from a monetary policy transmission perspective. “In this way, the benefits of interest rate reductions would be passed on in a timely manner to households and businesses.”
The central bank observed that “the moderation of underlying inflation has continued”. The headline inflation declined further to 8.2 percent in May on the back of the recent cut in diesel and petrol prices.
The fiscal budget 2020-21 is also expected to be neutral for inflation as the freeze on government salaries, absence of new taxes, and lower production cost from reduced import duties should offset the decline in subsidies in some sectors. Given the absence of demand-side pressures, average inflation could fall below the previously announced range of 7-9 percent for next fiscal year.
On the real side, the decline in LSM (Large Scale manufacturing) deepened to 41.9 percent (y/y) in April, when lockdowns were still in place. In May, high-frequency indicators of activity such as cement dispatches, automobile sales, food and textile exports, and POL sales also continued to contract, although mostly at a lower rate than in the previous two months.
Looking ahead, the economy is expected to recover gradually in the current fiscal year supported by easing lockdowns, supportive macroeconomic policies and a pick-up in global growth. However, risks are skewed to the downside and the recovery will depend critically on the evolution of the pandemic both in Pakistan and abroad.
Pakistan’s industrialists, who have been calling for reduction in the key interest rates, have welcomed the move of central bank and called for further cuts in the current pandemic.
“There is more space for the interest rate cuts. Our demand is that the rates should be slashed to 5 percent or below”, Sheikh Sultan Rehman, Vice President of Federation of Pakistan Chambers of Commerce and Industry FPCCI, told Arab News. “The coronavirus has exerted massive negative impacts on our economy and the global economy which means the room to cut the rate still exists and the bank should exercise this option”, he added.
The International Monetary Fund (IMF), in its World Economic Outlook (WEO) released on Wednesday, has further downgraded its 2020 global growth forecast to negative 4.9 percent, 1.9 percentage points lower than in April, and projected a more gradual recovery than previously anticipated.
State Bank of Pakistan cuts key policy rate by 100bps to 7%
https://arab.news/njsbt
State Bank of Pakistan cuts key policy rate by 100bps to 7%
- The surprise move comes amid improved inflation outlook and domestic economic slowdown
- Industrialists demand policy rate to be 5% or below given the global economic meltdown
Pakistan’s economic conditions improving, reforms and privatization on track — PM
- Sharif says exports and remittances had shown a rise within one-and-a-half month of his government
- Pakistan’s finance ministry expects the economy to grow by 2.6 percent in the current fiscal year ending June
ISLAMABAD: Pakistan’s economic indicators are showing positive signs, with an agenda of painful reforms and privatization on track, Prime Minister Shehbaz Sharif said on Friday, ahead of an IMF board meeting to decide on a $1.1 billion funding for the country.
The prime minister said, in an address to his cabinet that was telecast live, that exports and remittances had shown a rise within one-and-a-half month of his government.
The IMF board is meeting on Monday to decide on the disbursement of the second and last tranche of a $3 billion standby arrangement Islamabad secured last summer to avert a sovereign default.
With a chronic balance of payment crisis, Pakistan needs $24 billion in payments for debt and interest servicing in the next fiscal year starting July 1 — three-time more than its central bank’s foreign currency reserves.
The South Asian nation is seeking yet another long-term, larger IMF loan. Pakistan’s Finance Minister, Muhammad Aurangzeb, has said Islamabad could secure a staff-level agreement on the new program by early July.
If successful, it would be the 24th IMF bailout for Pakistan.
The IMF-led structural reforms require Pakistan to raise its tax to GDP ratio from around 9 percent to at least 13 percent-14 percent, stop losses in state-owned enterprise and manage its energy sector losses which run into trillions of rupees.
“It is not just for an antibiotic to work anymore. It needs a surgery,” Sharif said.
Pakistan’s finance ministry expects the economy to grow by 2.6 percent in the current fiscal year ending June, while average inflation is projected to stand at 24 percent, down from 29.2 percent in fiscal year 2023/2024.
Inflation soared to a record high of 38 percent last May.
Pakistan joins calls by UN for ‘credible investigation’ into mass graves discovery in Gaza
- Palestinian authorities say mass graves at Nasser and Al Shifa hospitals contain hundreds of bodies
- Pakistan says “independent and impartial investigation” must fix responsibility and punish perpetrators
ISLAMABAD: Pakistan said on Friday it joined the United Nations in calling for a “transparent and credible” investigation into the discovery of mass graves at two major hospitals in Gaza where over 34,000 Palestinians have been killed by Israeli attacks since October.
The discovery of the mass graves, said by Palestinian authorities to contain hundreds of bodies, have triggered calls by the UN rights chief and others for an international investigation. While not defined under international law, a mass grave is a burial site containing multiple bodies, the existence of which could be important in detecting possible war crimes.
Palestinian authorities said a grave site discovered at the Nasser hospital, the main medical facility in central Gaza, contained nearly 400 bodies. It was uncovered after Israeli troops pulled out of the city of Khan Younis.
Another grave site was also found by Palestinian authorities at the Al Shifa hospital in northern Gaza, which had been targeted by an Israeli special forces operation.
“Pakistan joins the calls by the United Nations for a clear, transparent and credible investigation of mass graves and the massacre of men, women and children by the Israeli occupation forces,” the foreign office spokesperson said at a weekly briefing in Islamabad.
“An independent and impartial investigation must be held to ascertain the facts, fix responsibility and punish the perpetrators of war crimes and crimes against humanity in Gaza.
“We urge the international community, especially the backers of Israel to take urgent measures to bring an end to the war on the people of Gaza. Lift the siege, protect civilians, facilitate humanitarian assistance and to hold to account the perpetrator of Gaza genocide.”
Currently, the International Criminal Court in The Hague has an active investigation into the attacks on Israel on Oct. 7 by Hamas and the response by the Israeli military.
The office of the prosecutor has jurisdiction in the Palestinian territories, but has not made any public comments about the discovery of mass graves.
Under the 1949 Geneva Conventions, to which Israel is a signatory, parties to a conflict must take all possible measures to prevent the dead from “being despoiled.” Customary international humanitarian law (IHL) calls for the dead to be respected, including a duty to prevent despoiling of graves and ensuring the identification and proper burial of human remains.
IHL also prohibits mutilation, desecration and other forms of disrespect toward the dead, while parties should take measures to protect grave sites, including those containing multiple human remains.
In 2002, in a case related to killings of Palestinians in the Jenin refugee camp in the West Bank, Israel’s Supreme Court ruled that the Israeli Defense Ministry was responsible under international law “for the location, identification, evacuation, and burial of the bodies” of Palestinians killed in fighting. The judges said bodies should not be buried in mass graves but handed over to the Palestinian authorities.
The International Criminal Court’s founding Rome Statute defines the desecration or mutilation of dead bodies as a war crime and this is banned as an outrage upon personal dignity.
Allegations by Palestinian authorities that the Israeli Defense Forces (IDF) had buried the bodies were “baseless and unfounded,” the IDF said in a statement. The graves were dug by Palestinians, it said, releasing footage showing the graves pre-dated IDF operations.
IDF forces searching for Israeli hostages had examined bodies buried near Nasser hospital and then returned them, the IDF said.
“The examination was carried out respectfully while maintaining the dignity of the deceased,” it said.
With inputs from Reuters
China says will continue investments in Pakistan after deadly suicide bombing
- On Mar. 26, suicide bomber hit a convoy of Chinese engineers working on Dasu hydropower project
- Five Chinese nationals and their Pakistani driver were killed in the attack in northwestern Pakistan
ISLAMABAD: The Chairman of the China International Development Cooperation Agency (CIDCA), Luo Zhaohui, said Beijing will continue to work with Pakistan to fulfill commitments made under the framework of the China-Pakistan Economic Corridor and the Global Development Initiative, Pakistani state news agency APP reported on Friday.
Luo’s statement comes a month after a suicide bomber rammed a vehicle into a convoy of Chinese engineers working on a hydropower project at Dasu in the northwestern Khyber Pakhtunkhwa province, killing five Chinese nationals and their Pakistani driver.
The assault on Mar. 26 was the third major attack in little over a week on China’s interests in the South Asian nation, where Beijing has invested more than $65 billion in infrastructure projects as part of its wider Belt and Road initiative.
Chinese contractors suspended work on three hydropower projects in view of security concerns after the March attack, government officials told media last month.
“China is ready to work with Pakistan to implement the consensus reached by the leaders of the two countries, further, deepen strategic mutual trust, and promote practical cooperation in various fields within the framework of the China-Pakistan Economic Corridor and the Global Development Initiative,” APP quoted Luo as saying.
“In his meetings with friends from various sectors during a recent visit to Pakistan, he hoped that friends from all walks of life would continue to exert their influence, and offer advice and suggestions for the development of bilateral relations.”
During the meetings, according to APP, Lou thanked Pakistani officials for “their long-standing contributions to China-Pakistan friendly cooperation, emphasizing the increasingly significant strategic importance of accelerating comprehensive cooperation between China and Pakistan and leading regional development trends.”
The Pakistani side expressed condolences over the Dasu attack and “highly praised the enduring traditional friendship” between Pakistan and China and their cooperation in various fields.
“They added that Pakistan will continue to support the development of Pakistan-China relations, advance exchanges on state governance, and expand friendly exchanges between the two countries in various sectors, including between governments, parliaments, business communities, think tanks, youth, and civil society,” APP said.
The Mar. 26 bombing followed a Mar. 20 attack on a strategic port used by China in the southwestern province of Balochistan, where Beijing has poured billions of dollars into infrastructure projects, and a Mar. 25 assault on a naval air base, also in the southwest. Both attacks were claimed by the Baloch Liberation Army (BLA), the most prominent of several separatist groups in Balochistan.
Dasu, the site of a major dam, has been attacked in the past, with a bus blast in 2021 killing 13 people, nine Chinese among them, although no group claimed responsibility, like the Mar. 26 bombing.
Pakistan is home to twin insurgencies, one mounted by religiously-motivated militants and the other by ethnic separatists who seek secession, blaming the government’s inequitable division of natural resources in southwestern Balochistan province.
Chinese interests are under attack primarily by ethnic militants seeking to push Beijing out of mineral-rich Balochistan, but that area is far from the site of the Mar. 26 bombing.
Pakistan central bank expected to hold rates on Monday ahead of IMF deal
- Median estimate in Reuters poll predicts State Bank will hold rates steady
- South Asian nation is seeking new long-term, larger IMF bailout program
KARACHI: Pakistan’s central bank is widely expected to hold its key interest rate at a record 22 percent for the seventh straight policy meeting on Monday as Pakistan gears up for an International Monetary Fund board approval and talks on a longer term program.
Monday’s policy decision will be followed by the fund’s executive board meeting to discuss the approval of $1.1 billion in funding for Pakistan, which is the last tranche of a $3 billion standby arrangement with the IMF secured last summer to avert a sovereign default.
The median estimate in a Reuters poll of 14 analysts predicts the State Bank of Pakistan (SBP) will hold rates steady.
Four analysts are forecasting a 100-basis-point (bps) cut, while two expect a 50-bps cut on Monday.
Eight respondents expect a rate cut before Pakistan signs a new program with the IMF. There is another MPC meeting on 10 June 2024, which is possibly before Pakistan gets another IMF Programme.
The South Asian nation is seeking a new long-term, larger IMF loan. Pakistan’s Finance Minister, Muhammad Aurangzeb, has said Islamabad will begin talks with the fund next month, and could secure a staff-level agreement on the new program by early July.
Pakistan’s key rate was last raised in June to fight persistent inflationary pressures and to meet one of the conditions set by the IMF for securing the bailout.
Pakistan’s Consumer Price Index (CPI) for March rose 20.7 percent from the year before, slowing down partly due to the “base effect,” touching a record high of 38 percent in May 2023.
Tahir Abbas, head of research at Arif Habib Limited said that the central bank is unlikely to cut rates before getting a new IMF program. “The monetary policy will also consider the inflationary outcome of tensions in the middle east and its impact of fuel prices, along with the Fed’s delay in monetary easing,” he added.
“Expect a symbolic reduction in the current quarter (till June), with aggressive cuts to follow in the September quarter as the government has to roll over approximately 6.7 trillion rupees of maturing domestic treasury bills in the last quarter of the calendar year,” said Mustafa Pasha, CIO of Lakson Investments.
He added that by then there will be greater clarity on inflation and FX inflows. “Historically the SBP has cut rates in the 1st year of an IMF program and we expect the policy rate to settle around 17 percent by December.”
Punjab Police defends chief minister after controversy over wearing police uniform
- Sharif donned police uniform to attend passing out parade on Thursday
- Move widely criticized by political opponents and social media users
ISLAMABAD: Police in the Pakistani province of Punjab have said Chief Minister Maryam Nawaz Sharif’s act of wearing a police uniform to a passing out parade this week was a “commendable show of solidarity” after widespread criticism by opposition politicians and social media users.
On Thursday, Sharif, who is the first woman chief minister in Pakistan’s history, wore a police uniform while attending a passing out parade of woman constables and traffic assistants at the Police Training College in Chung.
Opposition leader in the National Assembly, Omar Ayub, and other opposition politicians like Yasmin Rashid, Moonis Elahi and Shahbaz Gill all criticized Nawaz’s decision to don the police uniform. The issue also remained a top trend on social media, with many users questioning the logic behind the move.
But the Punjab Police force came out in the chief minister’s defense in an X post.
“As per the ‘Punjab Police Dress Regulations’, the CM of Punjab, Maryam Nawaz Sharif, is entitled to wear the police uniform,” it said in a statement.
“This has been widely celebrated by the police personnel, who view it as a commendable show of solidarity.”
The statement said the Central Police Office had received hundreds of messages by police personnel who had “lauded” Sharif’s act of wearing the uniform and women police officers in particular were celebrating the gesture.
Punjab police also shared a copy of rules that govern how governors and chief ministers can dress on formal occasions.
As per the amended Punjab Police Dress Regulations, “chief minister may wear uniform on formal occasions like review of parades, while addressing police darbars, visiting police establishments or any such occasion as specified, for encouraging the police personnel and troops.”
Separately, a citizen named Waqar Ali filed a plea at a local court against Sharif, arguing that a civilian cannot wear the uniform of an institution and calling for a case to be registered against the Punjab chief minister.
