Pakistan’s economy improving with every passing day, says SBP

Governor State Bank of Pakistan (SBP) Reza Baqir said that country’s foreign reserves are increasing and today’s situation is far better as compared to the past.

Speaking to journalists after attending a seminar in Karachi, Reza Baqir said people are now taking interest in saving. “Masses have changed their currency accounts into savings”, he continued.

The governor SBP said the economic situation of the country is improving with every passing day, the decision to change exchange rate now paying fruits.

Reza Baqir said that the Islamabad working to fulfil requirement of the Financial Action Task Force (FATF), which are in favour of Pakistan.

On Thursday, the State Bank of Pakistan’s (SBP) net reserves were increased by $120 million to $9.23 billion during the week ending Dec.6.

According to the central bank’s data, the country’s total foreign reserves stood at $16.4 billion.

According to the breakup, foreign reserves held by the State Bank of Pakistan stood at $9.23 billion, while net foreign reserves held by commercial banks were recorded at $6.81 billion.

Total liquid foreign reserves is $16.4billion.

It is pertinent to mention here that State Bank of Pakistan had paid $1 billion against sukuk (Islamic bonds) in the first week of December. However, $1.3 billion received from Asian Development Bank after Dec.6th.

Meanwhile the Pakistan rupee has shown signs of recovery as it hit the highest level on Dec.9 against dollar since June 30, 2019.

The Pakistani rupee traded at 153.9300 on Dec.11. The Pakistani rupee on Dec.9 further recovered its value against the US dollar by 15 paisa in the interbank market and traded at Rs154.90.

The rupee decreased 1.31 per cent to 153.9300 from 154.9800 in the previous trading session.

The local currency has strengthened to hit a five-month high against the greenback fall owing to decline in imports, higher flow of foreign funds and positive macroeconomic news from the South Asian country.

Increase in dollar from lending agencies and foreign investment in rupee also helped stabilise the rupee-dollar parity. Similarly, Asian Development Bank also approved $1 billion emergency loan as budgetary support.

The rupee has recovered by Rs8.60 so far, which in turn reduced the state’s foreign debt by Rs860 billion since June this year. On June 26, the dollar traded as high as Rs164.

Currency dealers foresee rupee to rise further in coming months in the wake of higher inflows of dollars and increased attraction of local currency.

Importantly, Moody’s Investors Service (Moody’s) has affirmed Pakistan’s local and foreign currency long-term issuer and senior unsecured debt ratings at B3 and changed the outlook to stable from negative.

According to a report issued by the bond credit rating business of Moody’s Corporation, “the change in outlook to stable is driven by Moody’s expectations that the balance of payments dynamics will continue to improve, supported by policy adjustments and currency flexibility.”

It further stated, “Such developments reduce external vulnerability risks, although foreign exchange reserve buffers remain low and will take time to rebuild. Moreover, while fiscal strength has weakened with higher debt levels largely as a result of currency depreciation, ongoing fiscal reforms, including through the country’s International Monetary Fund (IMF) programme, will mitigate risks related to debt sustainability and government liquidity.” “The rating affirmation reflects Pakistan’s relatively large economy and robust long-term growth potential, coupled with ongoing institutional enhancements that raise policy credibility and effectiveness, albeit from a low starting point.”

“These credit strengths are balanced against structural constraints to economic and export competitiveness, the government’s low revenue generation capacity that weakens debt affordability, fiscal strength that will remain weak over the foreseeable future, as well as political and still-material external vulnerability risks,” it added.

Moody’s has affirmed the B3 foreign currency senior unsecured ratings for The Second Pakistan Int’l Sukuk Co. Ltd. and The Third Pakistan International Sukuk Co Ltd. The associated payment obligations are, in Moody’s view, direct obligations of the Government of Pakistan. “Pakistan’s Ba3 local currency bond and deposit ceilings remain unchanged. The B2 foreign currency bond ceiling and the Caa1 foreign currency deposit ceiling are also unchanged. The short-term foreign currency bond and deposit ceilings remain unchanged at Not Prime.

Agencies