Pakistan Cuts Key Interest Rate to Spur Growth: WSJ

By HARIS ZAMIR and NEELABH CHATURVEDI

KARACHI -- Pakistan's central bank Monday trimmed its key interest rate for the first time in more than six years to boost an economy battered by internal strife and a global downturn.

The State Bank of Pakistan cut the discount rate by 1 percentage point to 14%. The cut is effective Tuesday, Governor Syed Salim Raza told reporters at a news briefing.

"The falling inflation rate and the projection that it will come down before the end of the current fiscal (financial) year gave room for the rate cut," Mr. Raza said.

Nine out of 11 economists polled by Dow Jones Newswires had expected the central bank to cut rates at the policy meeting. The remaining two had expected rates to remain unchanged.

The monetary easing marks a turnaround by the central bank, which raised interest rates by 5 percentage points in 2008 in a bid to cool the then-rising inflation, and suggests its policy priority is now on spurring South Asia's second-largest economy.

Headline inflation remains high but is now less of a threat to the economy, having eased to 19.1% in March from a multi-decade high of 25.3% in August due to a sharp fall in commodity prices. The economy is poised to grow at its slowest pace in eight years in the financial year through June.

For more on this article, please click on the following link: Pakistan Cuts Key Interest Rate to Spur Growth: WSJ

Interest rate may be cut to 12pc: The News

KARACHI: Board of Investment Chairman Saleem H Mandviwalla has said interest rate may be cut to 12 per cent from 15 per cent after the government reviews the benchmark interest rate in March this year.

Besides that, “the government is bringing an industrial package, including new laws for the gems and stone sector,” he said.

He was speaking to industrialists at a seminar on ‘Public-Private Partnership’, organised by the Karachi Chamber of Commerce and Industry (KCCI) and its Infrastructure Management Unit (IMU) on Saturday.

He said the BoI was doing its best to include more and more private sector people in the public sector in order to make progress through public-private partnership.

He said the government had also made agreements for purchasing hybrid seed from China to improve per acre yield of crops and produce more food. “Hybrid seed will increase our per acre yield up to three times,” he added.

BoI Sindh Chairman and businessman Zubair Motiwala said the public-private partnership mechanism had always been productive all over the world whether they were developed or underdeveloped countries. He said the BoI would take all measures to exploit all possible areas of development including fish farming, corporate farming and agriculture in general.

A businessman invited the attention of BoI officials to smuggling of stationary and lubricant items from the Chinese border, to which Zubair Motiwala replied that the government should do something to control smuggling. “There are a variety of goods being imported into Pakistan under the Afghan Transit Trade Agreement (ATTA), which never went to Afghanistan and damaged local industries.

For more on this article, please click on the following link: Interest rate may be cut to 12pc: The News

Macroeconomic Conditions signal turbulence: Dawn

A.B. Shahid

THE recent monetary policy announcement by the new State Bank governor sends a clear message: that there is little in terms of improvement in the state of the economy to warrant the much demanded monetary loosening.

Based on traditional logic, the stance is correct; while fiscal, trade and current account deficits are already high there may be further slippages. First, with Federal Board of Revenue (FBR) collecting only Rs544 billion in first half of FY09, the full-year Rs1.36 trillion tax revenue target may not be met. Impliedly, public borrowing could stay high squeesing credit to the private sector, which won’t help contain the economic downswing.

Second, anticipated decline in trade deficit (courtesy falling imports) may be less than expected since: (i) export growth may decelerate due to global recession and infrastructure bottlenecks causing intermittent power and gas supply shortages; (ii) anticipated decline in oil import bill may turn out to be less than its projection.

Besides, deceleration in Consumer Price Index since September 2008 was moderate relative to Sensitive and Wholesale Price Indices, while Core Inflation Index (the peg for interest rates) remains what the governor called ‘stubborn’. According to him, ‘this signifies that demand pressures have not completely dissipated despite a slow down in economic activity.’

For once, SBP explicitly accepted that accumulation of excess demand since 2004 prepared the slope for inflation to slip uncontrollably, and in 2008 it caused multiple deficits, raised production costs all round, and blunted growth. To limit its fallout, SBP considered it expedient to continue its tight policy stance and to keep its discount rate unchanged at 15 per cent.

For more on this article, please click on the following link: Macroeconomic Conditions signal turbulence: Dawn

Pakistan targets 130 bln rupees in T-bill auction: Reuters

KARACHI, Feb 9 (Reuters) - Pakistan's central bank will auction 130 billion rupees ($1.64 billion) worth of 3-, 6-, and 12-month Treasury bills on Wednesday.

Settlement will be due the following day, the State Bank of Pakistan said.

The central bank said in December it would auction 565 billion rupees ($7.12 billion) worth of 3-, 6-, and 12-month T-bills up to the end of March. SBPK11.

For more on this article, please click on the following link: Pakistan targets 130 bln rupees in T-bill auction: Reuters

Pakistan expected to get $750m IMF loan in March: Daily Times

By Sajid Chaudhry

ISLAMABAD: Pakistan is likely to receive a $750 million loan from the International Monetary Fund (IMF) by the end of March, after the successful completion of the first review of the two parties’ standby agreement.

Sources in the Finance Ministry told Daily Times the first review of the standby agreement with the IMF would be conducted in Dubai between February 14 and 24.

They said the key performance benchmark was a budget deficit at or below 4.2 percent of the Gross Domestic Product (GDP) during the current fiscal year.

The other important benchmark, they added, was to maintain State Bank borrowing at Rs 258 billion at the end of each quarter.

They said Pakistan’s budget deficit had been estimated at around two percent of the GDP, much less than the target agreed upon with the IMF. Similarly, they added, the State Bank borrowing had been maintained at the agreed upon level so both conditions had been met successfully.

For more on this article, please click on the following link: Pakistan expected to get $750m IMF loan in March: Daily Times

Chapter 11 to be introduced in 2 months: The News

SBP governor hints at rate cut, calls for avoiding liquidity issues in future

Thursday, February 05, 2009
By Jawwad Rizvi

LAHORE: Governor State Bank of Pakistan Syed Salim Raza Wednesday said that Chapter 11 in the banking law would be introduced in the next two months.

This will allow borrowers to declare bankruptcy if they are unable to repay loans to the banks and lose their business. The working on this law was started some three years ago and now the central bank has almost reached the point where it could be introduced.

Syed Salim Raza expressed these views during a meeting with the leading industrialists, MPA Punjab and think tanks at the Punjab Governor House. The meeting was organised by the Governor Punjab Salman Taseer.

World over Chapter 11 bankruptcies are available to any business, whether organised as a corporation or sole proprietorship, and to individuals, although it is mostly used by corporate entities.

The SBP chief hinted a decline in mark-up rates as banks were easing out from liquidity issues and their deposits had started piling-up again. However, he did not announce any timeframe to cut the mark-up rate despite.

During the meeting hot debate was witnessed between Advisor to Finance Minister of Musharraf’s regime Dr Salman Shah and Salim Raza and director monetary policy department of SBP Dr Hamza Ali Malik as SBP chief had asked the director to reply Dr Shah quires.

Dr Shah asked the SBP chief to ponder upon the monthly figures of inflation and bailout the industry on short-term basis as being adopted world over to minimize the impact of credit crunch. Raza said that the central bank was not focusing on short term polices.

Dr Shah said that there is disinflation in the country during the last three months so the central bank should reduce the mark-up rates. He said comparing current inflation figures with past five year’s data is not suitable when the world economies are facing the credit crunch where as five years back there was excess liquidity in the system.

In his presentation to the industrialists Salim Raza justified the Monetary Policy announced last week. He said risks to Pakistan’s economy are relatively less as compared to 2008. Vulnerability of the external sector due to high prices of oil and other commodities; high cost of imports and weak prospects of foreign investment, have moderated considerably owing to improvements related to each area.

The SBP governor said progress has been made to control inflation in the last four months. The slow improvement in core inflation is due to the fact that non-fuel and non-food items, such as wages and rents and fares etc. continue rising after the supply side shocks recede.

For more on this article, please click on the following link: Chapter 11 to be introduced in 2 months: The News

Pakistan targets 70 bln rupees in T-bill auction: Reuters

KARACHI, Jan 26 (Reuters) - Pakistan's central bank will auction 70 billion rupees ($886 million) worth of 3-, 6-, and 12-month Treasury bills on Wednesday.

Settlement will be due the following day, the State Bank of Pakistan said.

The central bank said last month it would auction 565 billion rupees ($7.15 billion) worth of 3-, 6-, and 12-month T-bills up to the end of March. SBPK11.

For more on this article, please click on the following link: Pakistan targets 70 bln rupees in T-bill auction: Reuters

State Bank of Pakistan issues Guidelines To Banks For Credit Cards: A Pakistan News

KARACHI: The State Bank of Pakistan Saturday issued operational guidelines for credit card business of commercial banks, outlining code of conduct for various aspects of the business including marketing, interest rate charges, recovery of dues, billing processes etc.

The central bank has advised the banks to quote interest rate and service charges on annual basis and also inform the credit card holder on the interest rate or services charges through advertisement or sending information to them on their addresses.

The SBP has directed the banks not to levy any charge that was not explicitly mentioned either in the User Guide or Application Form or Schedule of Charges provided to the customer at the time of selling credit card, without the prior consent of the card holder.

For more on this article, please click on the following link: State Bank of Pakistan issues Guidelines To Banks For Credit Cards: A Pakistan News

Pakistan's July/Dec c/a deficit narrows to $6.053 bln: Reuters

KARACHI, Jan 16 (Reuters) - Pakistan's current account deficit narrowed in the six months from July through December to $6.053 billion, compared with $7.269 billion the same period last year, the central bank said on Friday.
The current account deficit for December fell to $458 million from $800 million in November, the State Bank of Pakistan said on its website.
Analysts said this was mainly due to a decrease in international oil prices. Oil was trading at $36 a barrel on Friday, compared to a record high of $147 in July last year.
Analysts said this would ease pressure on the central bank to raise the discount rate in the near term.
A six-monthly monetary policy meeting is due to be announced on Jan. 31, the central bank said on Friday.

For more on this article, please click on the following link: Pakistan's July/Dec c/a deficit narrows to $6.053 bln: Reuters

Pakistan’s Inflation Slows After Four Rate Increases: Bloomberg

By Khalid Qayum

Jan. 12 (Bloomberg) -- Pakistan’s inflation eased from near a three-decade high in December after the central bank raised its benchmark interest rate four times in 2008.
Consumer prices in South Asia’s second-largest economy increased 23.34 percent from a year earlier after gaining 24.68 percent in November, the Federal Bureau of Statistics said in Islamabad today. Analysts were expecting a 22.6 percent increase.

Slower inflation may allow the State Bank of Pakistan to refrain from another rate increase in its next policy statement later this month, economists said. The central bank promised the International Monetary Fund as part of a $7.6 billion bailout to raise borrowing costs if foreign reserves drop too low.

“Given our declining inflationary numbers and stable exchange rate outlook, we expect interest rates to decline in coming months,” said Muhammad Imran Khan, an analyst at First Capital Securities Ltd. in Karachi. “An interim cut in the key policy rate between January and July cannot be ruled out.”

Former Governor Shamshad Akhtar on Nov. 12 raised the central bank’s key rate by 2 percentage points to 15 percent, describing the move as “the toughest decision of my life.” The bank pledged to the IMF to increase the rate again if foreign reserves fell below $1.165 billion at the end of December.

For more on this article, please click on the following link: Pakistan’s Inflation Slows After Four Rate Increases: Bloomberg

SBP declared second best central bank: The News

KARACHI: The fourth annual Islamic Finance News Poll results are in after a record breaking 2,491 unique votes were cast by the Islamic finance industry’s leading practitioners and participants.In the financial sphere, 2008 was deemed by many as an annus horribilis with the global markets plummeting following in large to the US mortgage industry, said a statement of the State Bank of Pakistan on Saturday.

The Islamic finance industry also succumbed to market forces but by and large fared better than its conventional counterparts, it noted.What is clear, from the results of the 2008 Islamic Finance news poll, is that the more focused and specialised Islamic financial institutions are favoured to those of the larger global historically conventional institutions with Islamic operations.With 2,491 votes cast, this is the industry’s most comprehensive and definitive survey.

In the Best Overall Islamic Bank category, Kuwait Finance House again ran out easy favourites for the second year running. Malaysia’s CIMB Islamic Bank climbed one place to second this year with Saudi Arabia’s Al Rajhi Banking and Investment Corporation taking third spot. One notable absentee from this category is the two times winner and runner-up in 2007, Dubai Islamic Bank.

As more of the world’s financial centres announce their interest in attracting Islamic finance to their shores one would assume the Best Central Bank in Promoting Islamic Finance category would be more competitive. Not so. For the fourth straight year Bank Negara Malaysia was voted number one with more than double the votes of their nearest rival, the State Bank of Pakistan, which itself leapfrogged the Central Bank of Bahrain into second place this year.

For more on this article, please click on the following link: SBP declared second best central bank: The News

Pakistan's foreign reserves rise to $10 bln: Reuters

KARACHI, Jan 9 (Reuters) - Pakistan's foreign exchange reserves rose $340 million to $10 billion in the week that ended on Jan. 3, the central bank said on Friday.

(Reporting by Sahar Ahmed; Editing by Robert Birsel)

For more on this article, click on the following link: Pakistan's foreign reserves rise to $10 bln: Reuters

Pakistan targets 565 bln rupees in T-bill auctions: Reuters

KARACHI, Jan 2 (Reuters) - Pakistan's central bank said it would auction 565 billion rupees ($7.15 billion) worth of three-, six-, and 12-month Treasury bills up to the end of March.

The State Bank of Pakistan said there would be six auctions before the end of the first quarter of 2009, with the next one on Jan. 14, with a target of 70 billion rupees and with settlement due the following day.

Subsequent auctions will be on Jan. 28 and Feb. 11, with a target of 70 billion rupees and 130 billion rupees respectively, and both with settlement due the day after the auction, the bank said.

For more on this article, please click on the following link: Pakistan targets 565 bln rupees in T-bill auctions: Reuters

Pakistan Appoints Raza Central Bank Governor After Akhtar Quits: Bloomberg

By Cherian Thomas and Khaleeq Ahmed

Dec. 29 (Bloomberg) -- Pakistan appointed Saleem Raza, a former Citigroup Inc. executive, as governor of the central bank after Shamshad Akhtar said she will step down from the post as the nation grapples with its worst economic crisis in a decade.

Prime Minister Yousaf Raza Gilani “expressed confidence that the new governor, who has sound experience in the financial sector and international banking, would work to the best of his abilities to meet the enormous economic challenges,” according to a statement from the Prime Minister’s office in Islamabad.

The new leader of the State Bank of Pakistan will have to subdue inflation running at more than 24 percent while economic growth is slowing. The governor will also have to deal with conditions imposed last month by theInternational Monetary Fund when it lent $7.6 billion to buffer the nation’s depleting foreign-exchange reserves.

“It’s a pretty challenging situation,” said Sakib Sherani, country economist at Royal Bank of Scotland in Islamabad. “The risk is the new person may not be up to speed with the nuances of monetary policy. Continuity would have been good.”

For more on this article, please click on the following link: Pakistan Appoints Raza Central Bank Governor After Akhtar Quits: Bloomberg

Pakistan withdraws $1.7bn invested in US capital market: The News

By By Mehtab Haider
ISLAMABAD: Pakistan has withdrawn around $1.7 billion invested with selected fund managers out of total $3.2 billion largely put into various tools of the US Treasury and the US capital market, The News has learnt.

Now around $1.5 billion foreign currency reserves are lying with the fund managers, market sources said and added that the reserves management had raised several questions in the past during the tenure of Musharraf-Aziz regime because the country got minimum return compared to giving huge profits to those foreign investors who purchased Pakistani papers such as eurobond and others.

However, the State Bank of Pakistan confirms that it did not pay any penalty for withdrawal of its investment funds.“Anticipating such a situation, the SBP had included terminal clauses in all investment management agreements. Therefore, the central bank can call back funds from fund managers without any notice period and without incurring any penalty. All transactions are conducted on prevailing market prices,” the SBP categorically said.

In a written reply, the SBP also confirmed that during the last four fiscal years, $1.73 billion has been accumulated through a focused investment strategy that contributed as investment income on the part of forex reserves held by the SBP.“These returns were achieved on an overall average investment portfolio of $9.71bn during the last four years, despite holding a conservative and risk adverse portfolio in turbulent global markets,” it added.

For more on this article, please click on the following link: Pakistan withdraws $1.7bn invested in US capital market: The News

New Re1, Rs2 aluminium coins: The News

Friday, November 21, 2008By our correspondentKARACHI: State Bank of Pakistan (SBP) started issuing new Re1 and Rs2 aluminium coins from Thursday. These coins have different metal composition, colour and weight but their design and diameter are same as the existing coins introduced in September 1998.In a handout issued here, SBP said the existing coins of Re1 and Rs2 will also continue to remain in circulation as legal tender.

For more on this article, please click on the following link: New Re1, Rs2 aluminium coins: The News

Pakistan’s banking system remains unhurt by financial market turmoil: SBP Governor: APP

KARACHI, Oct 21 (APP): Banking system of Pakistan has escaped the major ravaging effects of the recent financial market turmoil emerging from the US and engulfing the developed European economies. This was stated by Governor, State Bank of Pakistan (SBP), Dr. Shamshad Akhtar while speaking at the Asian Banker Dialogue on “The Banks We Like : and the Impact of the Global Financial Crisis on Pakistan’s Banks” here at a hotel on Tuesday.

The SBP Chief, however observed “In my assessment, Pakistan’s economy to- date has been affected mainly by the indirect impact of global events which led to the rise in the global commodity prices.”

Pakistan is perhaps the worst hit economy by the surge in global commodity prices as it has been a predominant factor in derailing the macro-economic fundamentals, she remarked.

Citing an example to explain this situation, she said almost 80 percent of the external current account deficit in FY08 is equivalent to the oil import bill which shot up to more than dollars 11 billion in FY08 as compared to below dollars 3 billion a few years back. Similarly, a large increase in FY08 fiscal deficit is on account of delay in pass-through of the international price hike at retail level, she observed.

Dr Akhtar said the financial markets in Pakistan have not been hit by the subprime markets or the associated contagion directly as Pakistan’s banking system from July 2007 to September 2008 did not face any liquidity problems. With strong regulatory oversight, we have seen significant enhancement of capital and capital adequacy ratio supported by high provisioning requirements.

For more on this article, please click on the following link: Pakistan’s banking system remains unhurt by financial market turmoil: SBP Governor: APP

Pakistan targets 50 bln rupees from T-bill auction: Reuters

KARACHI, Oct 20 (Reuters) - Pakistan's central bank said on Monday it would auction 50 billion rupees ($617 million) worth of three-, six-, and 12-month Treasury bills this week.

The auction will be on Wednesday, with settlement due the following day, the State Bank of Pakistan said.

For more on this article, please click on the following link: Pakistan targets 50 bln rupees from T-bill auction: Reuters

Rupee recovers 2.2pc against dollar: Dawn

KARACHI, Oct 20: The State Bank on Monday entered the exchange rate market with such strength that the rupee recovered 2.2 per cent against the dollar.

The rupee made recovery after long time as it has been falling frequently against the greenback.

Currency dealers provided different figures of dollars injected by the SBP in the market ranging from $100 million to $275 million. However, the SBP only confirmed its intervention without providing any details of the amount injected.

“The rupee surprisingly recovered from 83 to 81 against the greenback,” said a currency dealer, who believed that the SBP pumped $275 million during the trading.

However, others said the amount was not more than $100 million.

Currency dealers were surprised as to why the SBP intervened while its own reserves were falling.

For more on this article, please click on the following link: Rupee recovers 2.2pc against dollar: Dawn

Pakistan central bank cuts cash ratio to inject liquidity: AFP

KARACHI (AFP) — Pakistan's central bank moved to inject liquidity into the country's struggling financial system on Saturday by cutting the amount of cash commercial banks must hold in reserve.

The bank lowered the cash reserve ratio two percentage points to six percent, and said it would be cut to five percent on November 15, as it sought to ease tight credit conditions that have hit economic demand around the globe.

Shamshad Akhtar, governor of the State Bank of Pakistan (SBP), said the move would inject 180 billion rupees (2.2 billion dollars) into the system and that the overall package would total 270 billion rupees.

"The State Bank will monitor the liquidity flow after the injection of massive liquidity into the banking system," she said.

"We would like judicious use of liquidity," she said, adding Pakistan's banking sector was "quite resilient and fully capable of withstanding market shocks and adverse macro economic conditions."

For more on this article, please click on the following link: Pakistan central bank cuts cash ratio to inject liquidity: AFP