The State Bank of Pakistan (SBP) announced that its Monetary Policy Committee (MPC) decided to cut the policy rate by 200 basis points to 13 per cent, effective 17 December 2024. This will help cement firms to have bank borrowing at lower rates, making their finance cost competitive.
In addition, the country’s current account balance in November 2024 saw a large surplus of US$729m – the fourth in a row. This brought the balance for the 5MFY24-25 period to US$944m. The shrinking goods trade deficit largely drove the improvement in November, while workers’ remittances remained around US$3bn. Goods imports fell by US$500m MoM, almost entirely because of lower petroleum imports. However, this seems to be temporary, due to delayed payments.
Forex reserves rise to US$12bn
SBP’s foreign exchange reserves rose to US$12bn by the end of November, thanks to inflows from multilateral lenders (other than the IMF) for various social and infrastructure projects. Notably, the IMF and SBP have guided that SBP’s foreign exchange reserves would be around US$13bn by June 2025 (only US$1bn ahead of current levels). However, the drain from external debt repayments should be greater in 2HFY24-25. The next IMF review is due in March 2025, which should unlock the next US$1bn tranche.
by Abdul Rab Siddiqi, Pakistan
