The State Bank of Pakistan (SBP) has exceeded its forward book target of $4.2 billion by the end of September, as per the IMF agreement, and it has exceeded other end-quarter targets, including net international reserves and net Good position to acquire household assets. According to State Bank Governor Jameel Ahmed, the statements were made during meetings with international investors hosted by top global banks during the IMF-World Bank meetings in Morocco.
Pakistan is in the process of economic recovery under the caretaker government after the IMF approved a $3 billion loan program in July, which helped prevent sovereign debt defaults.
Jameel Ahmad, governor of the State Bank of Pakistan (SBP), explained that foreign exchange buffers have improved due to increase in foreign exchange reserves and reduction in foreign exchange liabilities. SBP’s foreign exchange reserves increased to $7.6 billion from $3.1 billion by the end of September 2023, supported by non-debt-generating funds.
The current account deficit narrowed to 0.7 percent of GDP in FY23 from 4.7 percent in FY22. He said that the first administrative measures that contributed to reducing the current account deficit last year have been withdrawn, and ongoing stabilization measures and a flexible exchange rate have brought the deficit down from 0.5% of GDP to 1.5%. Expected to be in the range of %. fiscal year.
State Bank’s forward foreign exchange liabilities have come down, and the forward book target of $4.2 billion at the end of September 2023, which was agreed with the IMF, has been significantly exceeded. Furthermore, Pakistan is on track to address its long-standing structural weaknesses and achieve sustainable and inclusive economic growth with the support of multilateral and bilateral partners.
The governor noted that the State Bank was one of the first central banks to tighten monetary policy in response to global inflation. Despite some domestic challenges, such as the unusual floods at the start of the last fiscal year, the bank has raised the policy rate by 1,500 basis points over the past two years. Stabilization measures are beginning to bear fruit, with inflation easing to 31.4 percent in September, and the external account improving substantially, building foreign exchange buffers. With a policy rate of 22%, SBP expects real interest rates to turn substantially positive in the future as inflation is expected to ease significantly in the second half of the fiscal year.
The current policy mix of the government and the central bank is aimed at achieving stability by correcting macroeconomic imbalances. The standby arrangement with the IMF is expected to support ongoing efforts to stabilize the economy.
In summary, the Central Bank of Pakistan is meeting its IMF targets and has improved its foreign exchange reserves and reduced forward foreign exchange liabilities as well as addressing economic challenges and achieving stability.