🇵🇰 Banking Sector Updates

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SBP maintains key interest rate at 22pc for fifth time in a row​

SBP governor says inflation to start declining faster from March; analyst says announcement "in line with market consensus".

 

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Pakistan's economy to grow by 2-2.5% this FY: Shamshad​

Finance minister expresses disappointment over single initial public offering (IPO) at PSX in 2023

Salman Siddiqui
January 20, 2024

KARACHI: Caretaker Finance Minister Dr Shamshad Akhtar projected on Saturday that the country's economic growth will rebound by 2-2.5% in the current fiscal year.

Virtually addressing the 'IPO Summit 2024', organized by Pakistan Stock Exchange (PSX), Dr Akhtar estimated the agriculture sector to grow by 5.6% and industrial sector by 2.5% in the year.

She stood optimistic on collection of revenue in taxes, saying the Federal Board of Revenue (FBR) would most probably collect Rs10 trillion in FY24 compared to the set target of Rs9.4 trillion for the year.

Shamshad said the country's foreign exchange reserves have recently hit a high of $9.1 billion from $4 billion at the start of her term being the minister.

The finance minister said the State Bank of Pakistan's (SBP) was cognizant that the benchmark policy rate needs to come down, from current record high of 22%, to support economic activities .

However, the rate cut largely depends on deceleration in the inflation reading in the country that has spiked to record high in the recent past, she added.

The minister said the cut-off yields on T-bills has fallen below the central bank policy rate, indicating a possible cut in the interest rate.

She acknowledged the uptrend at PSX since start of the current fiscal year. The bourse gave a return of 55% at PSX in 2023 while the benchmark KSE 100 Index ended at over 62,450 points in December 2023.

However, the minister expressed her disappointment over a single initial public offering (IPO) at PSX in 2023, saying the IPO came after 15 years.

She asked the authorities concerned to increase the number of inventors at PSX that have remained stagnant at 200,000 for a long time.

Pakistan's economy to grow by 2-2.5% this FY: Shamshad | The Express Tribune

Minister expressed her disappointment over a single initial public offering (IPO) at PSX in 2023

tribune.com.pk

 

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SBP all set to replace currency notes in circulation to curb corruption​

The plan includes introduction of new notes with significantly enhanced security features starting Feb 2024

Salman Siddiqui
January 29, 2024

In a move aimed at curbing corruption and enhancing security features, the State Bank of Pakistan (SBP) has announced plans to replace almost all currency notes currently in circulation starting February 2024.

Speaking to journalists ahead of the monetary policy press conference on Monday, SBP Governor Jameel Ahmad outlined the central bank's strategy for gradually phasing out existing currency notes and introducing new ones.

The comprehensive plan, which is on the verge of finalisation, includes the introduction of new notes with fresh colour schemes along with significantly enhanced security features, acknowledging the global need for robust measures against counterfeit currency.

The decision comes on the heels of the SBP's acknowledgement that counterfeit notes, predominantly of the Rs1,000 denomination, have been circulating in the economy.

The move to introduce new currency notes is expected to act as a deterrent to corruption, particularly targeting individuals who have stashed illicit funds under sofas, beds, and backyards.

However, the central bank's initiative may not be without its share of political pressure, as some factions may resist the sweeping changes.

Governor Jameel Ahmad expressed confidence that the stringent measures would pose a formidable challenge for those attempting to replace old notes with new ones, thereby thwarting corrupt practices.

Furthermore, there had been earlier proposals from various quarters urging the central bank to discontinue the Rs5,000 note, which has been identified as a significant contributor to corruption in the country.

This high-denomination note has been implicated in bolstering the informal economy, as businesses often resort to using it for transactions outside the formal banking system.

Earlier, the central bank discontinued the unregistered prize bonds worth Rs40,000 and Rs25,000, considering they were used for bribes and to make big payments in the informal sector of the economy which is almost equivalent to the size of the formal economy.

SBP all set to replace currency notes in circulation | The Express Tribune

The plan includes introduction of new notes with significantly enhanced security features starting Feb 2024

tribune.com.pk

 

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Manager behind fraudulent bank withdrawals fired, Senate told​

Khaleeq Kiani
February 15, 2024

ISLAMABAD: A foreign bank disclosed before the Senate Standing Committee on Finance and Revenue on Wednesday that an employee was found involved in fraudulent actions, while the Federal Investigation Agency (FIA) said its forensic report had established the involvement of bank staff in the embezzlement of Rs410 million from the accounts of certain overseas Pakistanis.

The additional director of FIA and the chief executive officer of the foreign bank testified before the Senate panel, chaired by Saleem H. Mandviwalla. The committee asked the FIA to submit its final report within 21 days after the registration of an FIR.

The FIA officer told the meeting that a forensic report had been received on Feb 7 and an examination of the record had established that cheques had been issued with fake signatures. He said three persons had been identified and an FIR would be registered within a week, while action would be taken against those involved.

The committee was following up on a complaint by a number of overseas Pakistanis, claiming that Rs410m went missing from their accounts in Karachi.

The complainants said they had transferred the amount from a Dubai-based bank to the foreign bank in Karachi in 2017. However, when they went to the bank to withdraw the sum last year, staff replied that the amount had already been withdrawn and their account stood closed. The complainants alleged that bank officials had withdrawn their money by committing forgery while they were abroad.

The bank’s CEO told the committee that it had completed an internal investigation of the complicated case and the manager involved had been terminated from service.

In his written report, the bank’s chief said that as part of its internal audits in 2022 and the complaint against the branch manager in question, the bank had initiated an inquiry against him when no complaint was forthcoming from the customers.

“The matter was investigated, and it was found that there were certain discrepancies in the accounts of the three complainants… [the manager] claimed that the discrepant transactions were conducted with the permission of the said customers”.

 

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SBP-held foreign exchange reserves increase $13mn, now stand at $8.05bn​

• Total liquid foreign reserves held by the country stand at $13.15 billion

 

[Old School]

Pakistan’s Economic Growth Weakens on Record Interest Rates​

Pakistan’s economic growth weakened in the fiscal second quarter after record high interest rates impacted businesses and reduced consumer demand.
Gross domestic product expanded 1% in the October-December period from a year ago, according to data from the Pakistan Bureau of Statistics. The reading is lower than the median estimate of 1.8% in a Bloomberg survey. The National Account Committee also revised upward economic growth for the previous quarter to 2.5% from 2.13% earlier, the PBS said in a statement.

Growth in agriculture quickened to 5.02% from a year ago, while industry contracted 0.84%. The services sector grew 0.01%.

The South Asian country succeeded in averting a sovereign default last year, but the economy has remained fragile. Prime Minister Shehbaz Sharif, who returned to power after contentious elections in February, is seeking a new loan from the International Monetary Fund to support the economy and bolster Pakistan’s foreign exchange reserves.

While the IMF has cut its GDP forecast for the current fiscal year to 2% from 2.5% on weaker domestic demand, the State Bank of Pakistan sees better farming and industrial output supporting the economy. Pakistan’s economy saw a rare contraction last fiscal year of 0.17%.

The nation remains heavily reliant on IMF aid with $24 billion in external financing needs in the fiscal year starting July, about three times its foreign exchange reserves.

 

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[H1]SBP penalises 7 more banks for forex violations[/H1]
Imposes fines of Rs775.54m on financial entities amid low foreign reserves

Salman Siddiqui
April 18, 2024

PHOTO: FILE​

KARACHI: Pakistan's central bank has once again found at least seven commercial banks, including leading ones, to have violated instructions on transactions in foreign currencies, imposing financial penalties totalling Rs775.54 million on as many as nine banks in the quarter ending March 31, 2024.

The central bank has tightened its oversight of foreign exchange dealings by commercial banks and exchange companies amid the country's foreign exchange reserves (held by SBP) remaining low at $8 billion for the past couple of months until April 5, 2024, providing import cover for less than two months. These reserves are estimated to have further dropped to around $7 billion temporarily after repaying a foreign debt worth $1 billion last week. They are expected to rise back to around $8 billion again after the IMF releases the last tranche of $1.1 billion later this month (April 2024).

In a brief report titled 'Details of significant enforcement actions by SBP during the quarter ended March 31, 2024,' the State Bank of Pakistan (SBP) reported on Wednesday that it has imposed monetary penalties ranging from Rs38.54 million to Rs187.65 million on each of the seven banks found involved in violating instructions related to dealing in foreign exchange. The report did not provide details on the exact nature of the violations committed by the commercial banks regarding their foreign exchange dealings.

However, the central bank advised financial entities to improve their internal processes and strengthen their systems to ensure meticulous compliance with regulatory instructions and to avoid recurrence of similar violations.

Earlier, the central bank conducted a study and found 18 banks allegedly involved in overpricing foreign currency in rupee value in 2022 but decided not to penalise them due to strong opposition from the financial lobby. As many as 19 commercial banks had earned windfall income amounting to Rs110 billion in 2021 and 2022 by unnecessarily devaluing the rupee against the US dollar and other major currencies.

The government considered imposing a 40% tax on their windfall income in November 2023, which would have generated an additional Rs44 billion in revenues.

The central bank has repeatedly claimed to be in contact with the Ministry of Finance to take action based on their findings in 2022. In the recent past, the central bank has suspended licenses of many currency exchange companies for being involved in smuggling foreign currency across borders and manipulating the rupee-dollar parity.