Banking Industries Updates

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Bank deposits surge to all-time high

Register 14-year high growth rate of 22%, stand at Rs19.8tr at end of FY21


Salman Siddiqui
July 14, 2021

Going forward, average deposits are expected to grow 15% from 2021-23 compared to last 10-year average growth of 13%. PHOTO: FILE

KARACHI: Government, private sector and household deposits with banks in Pakistan grew 22% - the fastest pace in 14 years - to touch an all-time high of Rs19.8 trillion in fiscal year ended June 30, 2021 in the wake of a turnaround in the national economy.

Bank deposits had stood at Rs16.2 trillion a year ago on June 30, 2020, according to Topline Research.
“Acceleration in economic activities directly supports deposit growth as businesses and people earn more,” Arif Habib Limited Head of Research Tahir Abbas said.

Pakistan’s economy grew 4% in FY21 compared to the negative growth of 0.5% in the prior fiscal year. The government has set the growth target at 4.8% for the current fiscal year, which started on July 1.

“Growth in deposits came due to higher worker remittances (which soared 27% to a record high of $29.4 billion, equivalent to around Rs4.6 trillion, in FY21),” Topline Research said in a commentary on Tuesday.

Overseas Pakistanis send remittances to their family members back home mainly through banking channels which are reflected in deposits. In case the recipients spend the remittances, they still remain part of the national economy.

Besides, the government’s exorbitant borrowing from commercial banks - to bridge its budget deficit, shift to digital banking from conventional banking and excessive money printing all supported the increase in deposits over the year.

“A pickup in migration of financial transactions to digital channels over the last one year of the pandemic also helped keep a significant amount of deposits in the banking system, meaning transactions took place but the money did not go out of the banking system technically,” Meezan Bank Head of Product Development and Shariah Compliance Senior Executive Vice President Ahmed Ali Siddiqui said the other day.

“Government’s high borrowing from commercial banks has apparently created money (due to the multiplier effect) in the banking system,” another banker said.

He recalled that the International Monetary Fund (IMF) had barred the government from borrowing from the central bank for budgetary purposes with effect from July 1, 2019.

“The government is borrowing trillions of rupees from banks and the borrowed money still stays in the banking system. The double entry (deposit and lending) may have artificially created money in the system,” he said.

“Going forward, we expect average deposit growth of 15% from 2021-23 compared to last 10-year average growth of 13%,” Topline Research said.


Govt borrowing

Bank investments (risk-free lending to the government) in the sovereign debt securities like Pakistan Investment Bonds (PIBs) and T-Bills soared 29% to Rs13.7 trillion in FY21.

“Excess liquidity is being invested by banks due to muted growth in advances (bank credit to private sector),” the report said.

The investment-to-deposit ratio (IDR) increased from 66% in June 2020 to 69% in June 2021, but it was down from 70% in March 2021.

On the other hand, advances grew 10% to Rs9 trillion in FY21 as banks remained wary of overall economic conditions due to Covid-19.

“However, growth of 5% in the last quarter (April-June FY21) compared to the previous quarter (January-March) in bank lending is an indication of improving outlook,” it said.
Advances-to-deposit ratio (ADR) declined from 51% in June 2020 and 48% in March 2021 to 45% in June 2021.

“We expect ADR to improve as the government has imposed a tax on banks which fail to meet the minimum threshold of 50% ADR and as economic activity picks up.”

Total provisions against advances stood at Rs629 billion and remained unchanged over the past one year despite overall concerns of a sharp spike in non-performing loans (NPLs) due to the pandemic-linked deterioration in the financial health of corporates.

Growth of M2 (a form of money circulation in the system) came in at 14% in FY21 compared to FY20, primarily driven by higher government borrowing from scheduled banks (+17%).

Currency in circulation (CIC) increased 14% during the same period. CIC as a percentage of M2 stood at 29%, above the past five-year average of 27%, likely due to low interest rates and efforts to stay out of the sight of tax authorities, it said.

Published in The Express Tribune, July 14th, 2021.

 

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SBP's foreign exchange reserves soar to $18.2 billion, highest since January 2017

Ali Ahmed

14 Jul 2021

The State Bank of Pakistan (SBP) on Wednesday said that it has received $1 billion inflows against issuance of the Eurobond, pushing its foreign exchange reserves to the highest level since January 2017.



In a tweet, the central bank said that it received $1 billion in proceeds of the government’s tap offering of its recently-issued Eurobond.

Accordingly, SBP’s foreign exchange reserves, as on July 13, reached $18.2 billion, which is the highest level since January 2017.

“A sizable improvement in the current account position, during the last fiscal year, also largely contributed to buildup the foreign exchange reserves."

Pakistan borrowed $300 million for 5 years at a 5.875% interest rate, $400 million bonds for 10-years at 7.125%, and $300 million for 30 years at an interest rate of 8.450%.

It was Pakistan’s second bond sale of the year, after raising $2.5 billion in March through Eurobonds. After a gap of over three years, Pakistan entered the international capital market for the sale of Eurobonds.

However, the interest rates were slightly lower than the previous transaction.

Days ago, SBP received $1 billion as loan disbursement from China and $440 million from the World Bank.

In the last week of March, Pakistan received around $500 million from the International Monetary Fund (IMF) as a loan tranche under Extended Fund Facility (EFF) for budget support.

During June-2021, Pakistan also received proceeds of Wapda Green Eurobond, amounting to $499.0 million. All these inflows helped build foreign exchange reserves.

 

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Pakistan receives $1b in Eurobond proceeds

Foreign currency reserves soar to four and a half year high of $18.2b


Salman Siddiqui
July 14, 2021

KARACHI: Pakistan has received $1 billion raised by floating Eurobond in the international market last week, boosting the country’s foreign currency reserves to four and a half year high of $18.2 billion and supporting the rupee to stay stable against the US dollar and other major currencies.

“State Bank of Pakistan (SBP) has received $1 billion proceeds of the government’s tap offering of its recently issued Eurobond. Accordingly, SBP’s FX reserves as on July 13, 2021 reached $18.2 billion, which is the highest level since January 2017,” the central bank said on its official Twitter handle on Wednesday.

About a week ago, the government floated five, 10 and 30-year bonds at interest rates ranging from 5.875-8.45%.

Data breakdown suggested that the country borrowed $300 million for five years with a return of 5.875%, $400 million for 10 years at 7.125% and $300 million for 30 years at 8.45%.
It was the second major borrowing by Pakistan from international investors in recent months. Earlier, it raised $2.5 billion from the sale of Eurobond in the international market about three months ago.


Pakistan has planned to take nearly $16 billion in gross foreign loans in current fiscal year 2021-22 to repay old foreign debt and partially bridge its budget deficit.

Earlier, a central bank official said that net international borrowing was on the decline and used only to return previous debt. The growth in foreign exchange reserves was largely on the back of an outstanding surge in the inflow of workers’ remittances and the current account surplus in the first 11 months of previous fiscal year 2020-21.

The central bank is scheduled to report the current account data for the full year later this month.

The remittances sent home by overseas Pakistanis grew 27% to an all-time high of $29.4 billion in the previous fiscal year.

In addition to that, the country received another $1.6 billion in unconventional remittances through the Roshan Digital Account (RDA), which offers lucrative returns to non-resident Pakistanis on investment in different assets in their home country.

Interestingly, the country’s export earnings also improved during FY21.

Pakistan is undertaking economic reforms under the International Monetary Fund’s (IMF) ongoing $6 billion loan programme.

The lender has, however, delayed the sixth economic review till September and has withheld the next loan tranche in the wake of disagreement with Pakistan over some of the issues.

The government has resisted a further increase in power tariff aimed at controlling the circular debt and believes it will be able to rein in the growing debt through other measures.

In another development, the central bank reported last Thursday (July 8) that it had received $1 billion as government of Pakistan loan disbursement from China and $440 million from the World Bank in the week ended July 2, 2021.

Alpha Beta Core CEO Khurram Schehzad said that Pakistan's reliance on foreign debt has continued to increase "which is not good for the domestic economy."

He said the government has taken more debt from global markets mostly to repay the previous loans instead using it to pace up economic activities and for productive options like setting up import-substitution and export-based industries in the country.

The government's gradual shift towards acquiring long-term loans like for 30 years was a step in the right direction, as it would buy time to the government to fix fundamental issues and implement the much needed reforms in the domestic economy, he said.

Pakistan's outstanding foreign debt has increased by 4.5% (or $3.92 billion) over the past one year to $90.28 billion by end of March 2021 compared to $86.37 billion in March 2020, according to the State Bank of Pakistan (SBP).

The foreign debt-to-GDP-ratio has, however, dropped to 29.5% in March 2021 compared to 34.4% in March 2020, it added.

The drop in ratio was seen due to expansion in the domestic economy during fiscal year 2021 to 4% compared to contraction of 0.5% in the prior fiscal year 2020.

Schehzad said the government faces a challenge as to how to increase export earnings and attract potential foreign direct investment (FDI) in the country, which are a must to turn around debt-driven foreign exchange reserves into exports and investment driven reserves.

He said the outlook suggested that the balance of current account would turn into a deficit of $5-6 billion in the current fiscal year 2022 compared to a nominal surplus in the first 11 months of the previous fiscal year 2021.

The deficit would be seen due to significant increase in international petroleum oil prices and higher other imports in the growing economy.

He said the government may come up with more incentives to attract FDIs and technology transfer into the country. Besides, it needs to implement reforms in the areas including energy, fiscal, debt and governance to attract foreign investment and other sustainable inflows into the economy.

 

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SBP foresees surge in current account deficit, inflation

• Major downside risk to overall growth outlook for FY22 is the ongoing third and potentially additional waves of Covid-19
• While remaining bounded, the current account deficit is expected to rise, mainly due to a further widening in the trade deficit

Rizwan Bhatti
17 Jul 2021

KARACHI: Identifying certain structural vulnerabilities, the State Bank of Pakistan (SBP) is expecting surge in inflation and current account deficit in the future.


According to the SBP's Third Quarterly Report on The State of Pakistan’s Economy for the fiscal year 2020-21, going forward, in FY22, the economic momentum that became evident during FY21 is expected to strengthen further. The ongoing rollout of vaccines, coupled with the continuation of economic activities during the virus' second wave and most of the third wave, offers some optimism.

However, the report said a major downside risk to the overall growth outlook for FY22 is the ongoing third and potentially additional waves of Covid-19, which might necessitate the imposition of mobility restrictions and therefore disrupt the ongoing economic momentum.

In addition, in the external sector, while remaining bounded, the current account deficit is expected to rise, mainly due to a further widening in the trade deficit on account of likely rise in import payments. The increase in imports reflects higher oil prices, which are now projected to add to the pressures coming from consistently growing import volumes of energy commodities.
The State Bank said while the economy made an encouraging recovery during FY21, certain structural vulnerabilities continue to merit attention.

First, in the agriculture sector, the secular decline in cotton production needs to be addressed. Timely availability of pest-resistant seed varieties and further support from agriculture extension departments, particularly to promote the adoption of climate-smart farming practices, could enable better outcomes.
Second, in the external sector, the widening of the merchandize deficit needs to be contained to a sustainable level.

Greater self-sufficiency in agriculture, through adoption of better farming and crop management practices, and maintenance of adequate stocks can reduce the need to import commodities (such as wheat, sugarcane and cotton) to bridge domestic shortfalls or counter temporary price pressures. Discouraging the import of luxury consumer items and promoting greater diversification of exports, in terms of value-added items and destinations, could also help.

Third, efforts are required to mitigate food inflation, triggered largely by supply-side issues in the management of agriculture commodities. This may be achieved through better coordination among federal and provincial food departments, provision of reliable data, vigilant monitoring of stocks and food prices, and timely import of commodities.

Fourth, the twin burdens of debt servicing and a narrow revenue base are leaving less fiscal room for public investment. This calls for an acceleration of efforts to broaden the tax base, increase documentation in the economy, improve public financial management, restructure loss-making public sector enterprises, and reduce circular debt of the power sector.

The report said recent CPI outturns have indicated a consistent YoY increase in inflation in February, March and April 2021 primarily originating from the supply side, with the output gap still estimated to be negative.
The current uptick is concentrated among food items and utility (electricity) prices, whereas wage pressures are judged to be stable at this point. Furthermore, better commodity management, including by building strategic reserves of staple food items, is likely to alleviate supply-side pressures from food items. As a result, second-round effects of the supply-driven shocks to inflation are currently muted and inflationary expectations continue to remain well-anchored.

However, the report said there are multiple upside risks to the inflation expectations. First, the ongoing rising trend in international commodity prices is broad-based, with prices of oil, food and metals, all rising significantly. Second, upward adjustment in administered utility tariffs (electricity, gas, and fuel) could further feed into inflation as well as inflationary expectations. Third, wage pressures will need to be watched carefully, particularly in the context of any increases in the minimum wage and public sector pay. Fourth, the withdrawal of sales tax exemptions and other potential revenue generating measures in the FY22 budget may also lead to an increase in inflation during the fiscal year.

In addition, in the fiscal sector, a decent growth in revenues has been noted so far in FY21, with collections until April 2021 being higher than the target. Furthermore, the growth in expenditures is lower than last year (FY20), mainly due to lower development spending and restraint on non-interest current spending. On this basis, SBP is expecting that the fiscal deficit for FY21 is expected to be 6.5-7.5 percent of GDP.

However, an upside risk to this projection are higher payments on account of circular debt settlements. For FY22, while the budget is awaited, an improvement in the fiscal deficit is expected amid a continuation of the current growth trends in revenue collection into FY22, as well as the acceptance of the proposal to remove corporate tax exemptions. Lastly, the higher growth outcome in FY22 would further boost revenue collection, while PSDP spending is expected to increase.

On the agricultural side, the impetus is likely to come from a further improvement in output, with the government emphasizing the use of better seed varieties and modern technology. In particular, cotton production is expected to recover from the multi-year low recorded in FY21.

The government's Kharif and Rabi packages, which typically include subsidies on fertilizers and other inputs, are also anticipated to support growth in the agriculture sector.

Further impetus to economic growth is likely to come from expected investments under TERP and the policy-driven boost in construction activities.

Furthermore, the government has indicated its intention to increase PSDP spending, which would also be a major contributing factor to the higher growth outcome. These favorable trends across agriculture and industry would also spill over to the services sector.

On the other hand, the growth in export receipts is mainly projected to come from the continued strong momentum in high value textile items (that is, apparel and home textiles), as well as a rebound in rice exports amid better crop expectations (which would allow exporters to offer more competitive prices).
However, potential downside risks to the export growth include continually rising international prices of textile inputs (including cotton yarn), which might impact exporters' competitiveness; as well as the resumption in economic activity in key competitors (especially India and Bangladesh) amid vaccinations and a subsiding in Covid cases.

Finally, workers' remittances are projected to remain buoyant, as the main factors (switch to formal channels, incentives for banks and MTOs, etc.) will still be in place. In addition to this, progress on the IMF program would help the continuation of foreign exchange inflows from external sources, while promoting further stability in the balance of payments.


Copyright Business Recorder, 2021

 

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The State Bank of Pakistan (SBP) has made amendments to forex regulations related to imports including transition from Electronic Import Form to Pakistan Single Window.

Considering the market dynamics and keeping pace with changing business environment, the SBP is in the process of revising the foreign exchange regulations, in consultation with relevant stakeholders in a phased manner.

The primary objective of these revisions is to promote ease of doing business by simplifying the existing instructions, removing the redundancies and delegating more powers to the Authorized Dealers for facilitation of the stakeholders.

The SBP has notified revisions in foreign exchange regulations for imports of goods into Pakistan (Chapter 13 of the FE Manual). The key changes include amendment in existing regulations to facilitate import transactions through the forthcoming Pakistan Single Window facilities, thereby eliminating the requirement of Electronic Import Form (EIF). Besides, the banks have been delegated more powers to approve the import transactions which earlier required regulatory.

The SBP and Pakistan Customs had implemented EIF Module in WeBOC system from September 1, 2016. EIF is an electronic declaration by importers approved by their bank detailing payment information for import of goods. It is required before filing of Good Declaration to Pakistan Customs for clearance of imported goods.

However, once the Pakistan Single Window (PSW) becomes operational, the requirement for EIF will be eliminated. PSW system is a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single-entry point to fulfil all import, export, and transit-related regulatory requirements. The system shall help reduce the time and cost of doing business by making trade related business processes more efficient, transparent and consistent.

Copyright Business Recorder, 2021

 

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FY21 Economic Indicators of Pakistan.

Remittances = $29.4B
27%

YoY, highest ever
Goods Exports = $25.6B
14%

YoY, highest ever
IT Exports = $2.1B
47%

YoY, doubled in 3 years
Forex Reserves = Above $25B first time
Current Account = -$1.9B
0.6% of GDP, Lowest in 10 years

Source: SBP (State Bank of Pakistan)

 

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The government of Pakistan estimated growth at 3.9 percent in fiscal year 2021, and the improvement is underpinned by strong growth in industry and services and steady remittance inflow, says the Asian Development Bank (ADB).

The Bank in its latest report “Asian Development Outlook supplement” stated that inflation in Pakistan averaged 8.8 percent in the first 11 months of fiscal year 2021 on rising global commodity prices, especially for food and crude oil.

The supplement to ADB’s flagship economic publication, Asian Development Outlook (ADO) 2021, provides updated projections for the region’s economies and inflation levels amid the COVID-19 pandemic.

 

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Foreign exchange: SBP reserves rise $845m to $18.1b

Increase comes following receipt of $1b in proceeds of Eurobonds


Our Correspondent
July 23, 2021


The foreign exchange reserves held by the central bank rose 4.9% on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Friday.

On July 16, the foreign currency reserves held by the SBP, after accounting for external debt repayments, were recorded at $18,050.7 million, up $845 million compared with $17,205.6 million recorded on July 9.

“During the week ended July 16, SBP received proceeds of $1,040.8 million against Pakistan Eurobonds,” the central bank said.

Overall liquid foreign currency reserves held by the country, including net reserves held by banks other than the SBP, stood at $25,128 million. Net reserves held by banks amounted to $7,077.3 million.

Earlier, Pakistan borrowed $2.5 billion through Eurobonds on March 30, 2021 by offering lucrative interest rates to lenders aimed at building the foreign exchange reserves.

It received the first loan tranche of $991.4 million from the International Monetary Fund (IMF) on July 9, 2019, which helped bolster the reserves. In late December 2019, the IMF released the second loan tranche of around $454 million.

The reserves also jumped on account of $2.5 billion in inflows from China. In 2020, the SBP successfully made foreign debt repayment of over $1 billion on the maturity of Sukuk.

In December 2019, the foreign exchange reserves surpassed the $10 billion mark owing to inflows from multilateral lenders including $1.3 billion from the Asian Development Bank (ADB).

 

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State Bank of Pakistan (SBP) third quarterly (Jan-Mar FY21) report..

The State Bank of Pakistan (SBP) said in its third quarterly (Jan-Mar FY21) report on the state of Pakistan’s economy that the trade deficit rose on the back of a sharp increase in non-energy imports. Food, transport, textile and machinery groups largely contributed to the increased imports. Energy imports, on the other hand, remained subdued, due to higher base effect.

“Meanwhile, exports also rose, but less sharply as compared to the increase in imports,” the central bank said. “Value-added textiles contributed the most to the expansion in exports. Among non-textile exports, the increase in rise exports remained moderate, as higher non-basmati rice exports partly arrested the decline in basmati rice exports.”

The SBP and government’s policies to support revival of economic activities in the wake of the pandemic have facilitated growth in the leading export sectors. They included, among others; sharp decline in policy rate, which lowered the cost of financing; subsidies on gas and power supply to industries; faster sales tax refunds; enhancement in the limits of refinancing under the Export Finance Scheme (EFS) and the Long-Term Finance Facility (LTTF).

“Pakistan’s imports rose in three consecutive quarters for the first time in the last 10 quarters, indicating that the declining trend in the imports that had appeared since Q1-FY18 has bottomed out,” the central bank added in the 3QFY21 report issues last week.

As the economic recovery gained traction, the imports increased…,” SBP said.

The Covid shock warranted the introduction of accommodative policies to stimulate economic activities. Reviving economic activities, however, led to a broad-based increase in non-energy imports…,” it said.

Besides, the lower than targeted wheat output last year and the government’s efforts to stabilise wheat and wheat flour prices, contributed to significant wheat imports. “This, coupled with rising international palm oil prices, pushed up food imports…”

After food, transport was the second largest contributor to the increase in overall imports. Specifically, car imports witnessed a rapid growth.

Published in The Express Tribune, July 21st, 2021.

 

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BUSINESS & FINANCEEncouraged by 'positive developments', SBP keeps interest rate unchanged at 7%

• Majority of financial market participants had expected the MPC to keep rate unchanged at 7%

Ali Ahmed
27 Jul 2021


The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has kept the key interest rate unchanged at 7% for the next two months.

"At its meeting on 27th July 2021, the MPC decided to maintain the policy rate at 7 percent," read the monetary policy statement on Tuesday. "Since its last meeting in May, the MPC was encouraged by the continued domestic recovery and improved inflation outlook following the recent decline in food prices and core inflation.

"In addition, consumer and business confidence have risen to multi-year highs and inflation expectations have fallen. As a result of these positive developments, growth is projected to rise from 3.9 percent in FY21 to 4-5 percent this year, and average inflation to moderate to 7-9 percent this year from its recent higher out-turns."

The statement added that Pakistan's imports are expected to grow on the back of the domestic recovery and rebound in global commodity prices, albeit more moderately than in FY21. Pakistan's imports clocked in at $53.8 billion during the previous fiscal year, contributing significantly to the trade deficit even as exports registered a historic high.

The MPC noted that the market-based flexible exchange rate system, resilience in remittances, an improving outlook for exports, and appropriate macroeconomic policy settings should help contain the current account deficit in a sustainable range of 2-3 percent of GDP in FY22.

"Notwithstanding this moderate current account deficit, the country’s foreign exchange reserves position is expected to continue to improve this year due to adequate availability of external financing. Against this backdrop, the MPC felt that the uncertainty created by the on-going fourth Covid wave in Pakistan and the global spread of new variants warrants a continued emphasis on supporting the recovery through accommodative monetary policy."

This one will be a sustained economic recovery, says SBP

Addressing the key question of sustained improvement, the MPC said that there were good reasons to expect that the current economic recovery would be accompanied by external stability.

"Given expected resilience in remittances and an improving outlook for exports, the current account deficit is expected to converge toward a sustainable range of 2 - 3 percent of GDP in FY22. This is much lower than in FY17 and FY18, when the current account deficit increased to around 4 and 6 percent of GDP, respectively, and FX reserves fell by $2 billion and $6.4 billion, respectively.

"Moreover, imports this year are expected to be more skewed toward machinery rather than consumption compared to FY17, and machinery imports are projected to be better distributed across sectors than in FY18, when power and telecommunications dominated.

"With the contained current account deficit and healthy commercial, official, portfolio and FDI inflows, Pakistan’s external financing needs of around $20 billion are expected to be more than fully met in FY22. As a result, foreign exchange reserves are projected to rise further."

Earlier, a majority of financial market participants had expected the MPC to keep the key interest rate unchanged.
“Keeping in view SBP’s medium-term inflation projection and its stance to support domestic demand, we expect the policy rate to remain unchanged at 7% in July’s MPS,” said Arif Habib Limited (AHL) in a research note circulated earlier.

As per a survey poll conducted by AHL, 78% of the total respondents are of the view that the SBP will keep the policy rate unchanged in July’s MPS.

Similar results were shared by Topline Securities in its market poll. “We are expecting no change in the policy rate in the Jul-2021 monetary policy statement (MPS), while we expect an increase during 2H2021 (second half of 2021),” said Topline in its research note.

In May, the central bank had also kept the key interest rate at 7% for the next two months as it expected monetary policy to remain accommodating in the near term and any adjustments in the policy rate will be measured and gradual to achieve mildly positive real interest rates over time.

The policy rate was last changed in June 2020, when MPC decided to cut it by 100 basis points to 7 percent and since then it has remained unchanged. Back then, MPC noted that the priority of monetary policy has shifted toward supporting growth and employment amid a slowdown in the domestic economy.

Meanwhile, on the external front, Pakistan closed FY21 with historic high levels of exports (goods) and remittances i.e. $25.3bn and $29.4bn, respectively. However, the current account posted a deficit of $1.9 billion in FY21, with a huge $1.6 billion deficit recorded alone in the month of June 2021. However, on a YoY basis, current account deficit has come down by 58% during FY21, the lowest deficit after 10 years. A surplus of $214 million was posted FY11.

 

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UAE banks successfully conclude Pakistan’s $350m Murabaha syndicated loan

Ali Ahmed
30 Jul 2021

UAE-based Ajman Bank and Commercial Bank of Dubai have successfully concluded Pakistan's $350-million Murabaha syndicated financing.

Both Ajman Bank PJSC and Commercial Bank of Dubai PSC acted as Initial Mandated Lead Arrangers and Bookrunners on the facility for the Islamic Republic of Pakistan acting through Ministry of Finance (MoF), read a press statement from Ajman Bank.

The Islamic Syndication Facility was originally mandated for $200 million, but it managed to attract more than 75% oversubscription driven by strong demand from local, regional, and international investors. The transaction was fully subscribed by 12 banks. Ajman Bank PJSC also acted as Investment Agent on the facility.

“The Facility marks another successful syndication for MoF and reaffirms investor confidence in Pakistan’s potential, supported by ongoing structural adjustments and continued investments in the physical infrastructure of the country,” read the statement.

As per details, Gulf International Bank, The Arab Investment Company, Islamic Corporation for the Development of the Private Sector (ICD), United Arab Bank, Commercial Bank of Dubai, along Ajman Bank were the key investors from GCC that participated in the transaction.

“We are delighted by the success of this Murabaha financing deal in Pakistan in collaboration with the Commercial Bank of Dubai,” Mohamed Amiri, Chief Executive Officer, Ajman Bank, said.

Dr. Bernd van Linder, CEO of Commercial Bank of Dubai, stated: “We are proud to collaborate with Ajman Bank on this landmark transaction for the Islamic Republic of Pakistan.”

Earlier this year, Pakistan tapped the international capital market for the sale of Eurobonds to build foreign exchange reserves. Accordingly, a multi-tranche transaction of 5-, 10- and 30-year Eurobonds was conducted and some $2.5 billion proceeds of the government against Eurobond issuance arrived in April this year.

In order to further build the country’s foreign exchange reserves, Pakistan decided to raise additional debt through the issuance of a Eurobond. Accordingly, some $300 million were raised through the sale of the five-year bond at 5.875 percent, $400 million against 10-year security paper at 7.125 percent, and an amount of $300 million through 30-year Eurobonds at 8.450 percent.

 

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PM lauds FBR's performance for collecting record revenue in July

https://nation.com.pk/NewsSource/web-desk
Web Desk
July 31, 2021


Prime Minister Imran Khan has lauded Federal Board of Revenue's efforts in achieving record revenue collection in the month of July.

He stated that this record collection of the revenue worth 410 billion rupees is highest ever in the month of July and 22 percent high than the target fixed for the month.

The Prime Minister stated that this is a result of the government’s policies for sustained economic growth and revival.

 

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SBP announces digital cheques clearing, unified QR code for payments initiatives

• Steps aimed at increasing usage of digital financial products and services, says central bank

Ali Ahmed
04 Aug 2021

The State Bank of Pakistan (SBP) has announced two new initiatives to facilitate the introduction of digital financial products and services by financial institutions, including a facilities for digital cheques clearing, and a unified QR code for payments.

The developments were shared at the 5th stakeholders meeting on Digital Financial Services, which was attended by various stakeholders, said the SBP in a statement issued on Wednesday.

SBP Governor Dr Reza Baqir said that the central bank is actively exploring the development of Open Banking, which allows sharing and leveraging of customer-permitted information among financial institutions to facilitate consumer choice, promote competition and efficiency in the financial sector, and encourage the introduction of innovative products and services.

The initiatives are targeted towards the overarching objective of accelerating digitalisation and financial inclusion. The central bank said that the digital cheque clearing initiative will replace physical presentation and clearing of cheques, reducing the time involved.

The second initiative, the introduction of a unified QR code, will allow payments by users from any digital application eliminating the need to use separate apps. Baqir said that the SBP will continue to promote innovative digital financial services and is ready to facilitate these endeavours by resolving issues as far as possible.

Briefing the participants on the progress made on SBP’s Raast payment platform, Baqir said that the second phase of person-to-person payments would be launched by October 2021 for which banks are being integrated with Raast.

During the meeting, SBP and Pakistan Telecommunication Authority (PTA) announced the formation of a SBP-PTA joint taskforce to work towards the prevention of frauds in digital financial services. In addition, the SBP and FBR have also agreed to form a joint committee to collaborate on a regular basis to increase digitisation in the economy.

 

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IMF approves $2.8b in fresh funds for Pakistan

Inflows will help country to combat challenges arising from Covid-19


Salman Siddiqui
August 04, 2021

KARACHI: The International Monetary Fund (IMF) has approved allocation of new funds for its member countries, including Pakistan, to help them combat the challenges arising from the Covid-19 pandemic and put the global economy on a sustainable growth path.

Under the new allocations, Pakistan is estimated to receive $2.8 billion during the current month (August 23). The inflows are projected to lift the country’s foreign currency reserves to a new record high of over $20 billion.

Besides, the inflows will not only improve the country’s capacity to make payments for imports and repay foreign debt, but will also help arrest the rupee depreciation against the US dollar and other major currencies.

The State Bank said last week (July 27) “in August, Pakistan’s reserve buffers are expected to rise by another $2.8 billion through the IMF’s planned new global SDR (Special Drawing Rights) allocation.”

Earlier, the Washington-based lender disbursed $1.4 billion to Pakistan in April 2020 under its first global SDR allocation to member countries to cope with the contagious disease. The IMF board of governors approved a general allocation of SDRs equivalent to $650 billion (about SDR 456 billion) on August 2, 2021 to boost global liquidity, according to an IMF press statement.

“This is a historic decision - the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis,” IMF Managing Director Kristalina Georgieva said in the statement available on its official website. “The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence and foster the resilience and stability of global economy.”

It would particularly help the most vulnerable countries struggling to cope with the impact of the Covid-19 crisis, she said. The general allocation of SDRs will become effective on August 23,
2021. The newly created SDRs would be credited to IMF member countries in proportion to their existing quotas in the Fund, it added.

“Currently, Pakistan’s quota (percentage of the total) is around 0.43%,” Arif Habib Limited (AHL) analyst Sana Tawfik said in a post-IMF SDR allocation commentary.

“SBP’s foreign exchange reserves currently stand at $17.82 billion and the (new) inflows can potentially take them past $20 billion - the highest in Pakistan’s history,” Topline Research Director Syed Atif Zafar said in comments on the IMF allocation.

To date, the highest level of SBP reserves was recorded at $19.46 billion in October 2016.

The foreign currency reserves have been on the rise for the past two years due to robust inflows of worker remittances, improvement in export earnings and growth in investment by the non-resident Pakistanis through the Roshan Digital Account (RDA).

The country’s reserves are partly maintained through deposits by friendly countries like Saudi Arabia, Qatar and China and through central bank’s short-term borrowing from commercial banks.

Almost half of the current foreign currency reserves of $17.82 billion “have been built through long-term borrowing from the international financial institutions, friendly countries and short-term borrowing,” Economist Shahid Hasan Siddiqui said the other day. The reserves have dropped slightly by around $200 million to the current level from the four-and-a-half-year high of $18.05 billion recorded in the week ended July 16, 2021.

The central bank said last week that imports might continue to remain high during the current fiscal year, meaning that the uptrend in demand for US dollar may persist and it will impact the rupee-dollar parity and foreign exchange reserves.

Accordingly, the State Bank of Pakistan (SBP) projected the current account deficit to increase to 2-3% of GDP in the current fiscal year compared to a 10-year low of 0.6% recorded in the previous fiscal year.

It, however, said the deficit at 2-3% was sustainable. It would allow the economy to grow by 4-5% in FY22 compared to 4% in FY21.

The increased demand for dollar for imports and foreign debt repayment took a toll on the rupee as the value of local currency dropped to a 10-month low of Rs163.89 against the US dollar in the inter-bank market on Tuesday.

The IMF said about $275 billion (SDR 193 billion) of the new allocation totalling $650 billion would go to emerging markets and developing countries, including the low-income countries.

“We will also continue to engage actively with our membership to identify viable options for voluntary channeling of SDRs from wealthier to poorer and more vulnerable member countries to support their pandemic recovery and achieve sustainable growth,” Georgieva said.

Published in The Express Tribune, August 4th, 2021.

 

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Roshan Digital Accounts: Deposits reach cumulative $1.87 billion in 11 months, says SBP


BR Web Desk
05 Aug 2021

Inflows under the Roshan Digital Account (RDA), a banking solution for Non-Resident Pakistanis (NRPs), have touched a cumulative $1.87 billion during the first eleven months, said the country's central bank on Thursday.

Between September 2020 and July 2021, deposits have reached a cumulative figure of $1,869 million, showed figures by the State Bank of Pakistan (SBP). So far, NRPs from over 175 countries have opened 199,747 accounts across different Pakistani banks.

Figures for July alone show that an inflow of $307 million occurred, taking the overall figure close to the $1.9-billion mark.

As per details, NRPs invested close to $1,278 million in Naya Pakistan Certificates launched by the federal government to attract foreign investment.

The RDA, an initiative of the SBP in partnership with major banks operating in Pakistan, is aimed at facilitating overseas Pakistanis to invest in the country.

The RDA enables opening an account without requiring physical presence either in Pakistan or in any embassy or consulate. It has also facilitated NRPs in conducting banking, payment and investment activities in the country.

NRPs can invest in Naya Pakistan Certificates, the stock market, and real estate through RDA. Funds in these accounts can be fully repatriated without any prior approval from the SBP.

Overseas Pakistanis play a vital role in Pakistan's economy that continues to battle rising external debt and a high current account deficit in the shape of remittances, which reached a historic high of $29.4 billion during the last fiscal year.