In today’s Monetary Policy Committee (MPC) meeting, the State Bank of Pakistan (SBP) decided to reduce the policy rate by 200bps to 13%.

Key Takeaways:

§  For FY25, Pakistan’s total external debt obligations are estimated at USD 26.1bn, comprising USD 22.1bn in principal repayments and USD 4bn in interest. As of today, USD 10.4bn (including USD 5.4bn in rollovers) has already been either repaid or rolled over. A significant portion of the remaining debt is also expected to be rolled over, with ~USD 5bn projected to be repaid during the rest of FY25.

§ The current account for Nov’24 is expected to post a significant surplus; November was ported by strong remittance inflows, which will likely boost the 4MFY25 surplus of the US. This substantiallsubstantially y.

§  Official inflows during 1QCY25 are expected to reach around USD 2bn, which will largely offset outflows. This balance is expected to enable the SBP to intervene in the interbank market, contributing to the accumulation of liquid reserves.

§  SBP reserves are projected to exceed USD 13bn by the end of FY25, an increase from the current USD 12.1bn.

§  Real GDP growth for FY25 is expected to be in the upper half of the projected range of 2.5–3.5%, indicating a positive economic outlook.

§  The SBP Governor reiterated that there is no specific real interest rate target. Regarding the outlook on interest rates, he emphasized that the policy stance will remain data-driven, with decisions made based on prevailing economic conditions and key indicators.

Courtesy – AHL Research