State Bank of Pakistan announce new monetary policy | Khaqan Najeeb & Abid Suleri's Analysis
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State Bank of Pakistan announce new monetary policy | Khaqan Najeeb & Abid Suleri's Analysis
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00:00Monetary policy for one and a half month has been issued by the Governor State Bank.
00:04100 basis points have been reduced in the interest rate.
00:07After that, 19.5% has been reduced.
00:101% reduction has been announced by the State Bank.
00:13The current interest rate of the State Bank was 20.5%.
00:17In June 2024, the monthly rate of inflation was 12.6%.
00:21The current account loss of June 2024 is 32.9 crore dollars.
00:25Last year, the current account loss was 68.1 crore dollars.
00:29On behalf of the country's economy, I would like to thank the Governor of the State Bank.
00:33He said that the rate of inflation is decreasing.
00:36There are no restrictions on the State Bank.
00:40Mr. Khakan Najeeb is with us to talk about this issue.
00:43Thank you very much, Mr. Khakan, for your time.
00:46You said that 100 basis points have been reduced in the interest rate.
00:50How do you see this monetary policy?
00:53If you look at it clearly, there is a lot of room for monetary easing in Pakistan.
01:00This means that if the headline inflation is 12.6% at the moment,
01:05and you have reduced the rate by 1%,
01:08it means that the real rate of 6.5% is still positive.
01:15Secondly, the external loss has also been managed.
01:19The economy has slowed. Demand has broken.
01:22FX reserves have also been built. Rupees are also stable.
01:25Despite repatriation, you have allowed 2.2 billion dollars.
01:30So, all in all, I think it was a fair room.
01:33The State Bank is still on the conservative side.
01:37Obviously, there is an attachment with the IMF.
01:40Because of that, the room to cut in Pakistan is being used at a minimum.
01:44And a lot of thought was being given that it would be cut by around 1%.
01:50I still think that Pakistan has a lot of room to cut.
01:55Because businesses are slow.
01:57Large-scale manufacturing is almost flat.
02:00If you look at next year's inflation estimates,
02:03you can clearly see that the higher band of the State Bank is 13.5%.
02:10This means that on a forward-looking basis,
02:13you are still getting a very clear room of 6%.
02:18The real interest rate is positive.
02:20So, all in all, I think there is still hope.
02:22When we are ongoing, we can reduce this rate further.
02:27And we can give a little impetus to the economy.
02:29So, Mr. Khakha and Mr. Rajeev,
02:31what do you think will be the impact of this monetary policy on the life of the common man?
02:36And how much will it affect the inflation rate?
02:38Will there be a reduction?
02:39Hopefully, people will start coming back to a business.
02:44They will hope that in the coming days,
02:47this rate will further ease in Pakistan.
02:50The energy prices that we are seeing right now,
02:53apart from that, there is no sign of an inflationary impact.
02:56And next year, GDP will remain at 3.5%.
03:02This has been said in the monetary policy.
03:04Mr. Khakha and Mr. Rajeev were presenting their comments on this.
03:07And 100 basis points have been reduced in the interest rate.
03:101% has been reduced in the interest rate.
03:12And now the current interest rate has been reduced by 5%.
03:16The current account loss has been reduced.
03:18To talk about this, Mr. Abid Suleri is also with us.
03:21Thank you very much, Mr. Abid, for taking the time.
03:23Please tell us, 1% has been reduced in the interest rate.
03:26What will you say about the new monetary policy?
03:28Yes, this was absolutely expected.
03:30Because the inflation numbers have improved a little.
03:34Pakistan's external financial flow has improved.
03:38After the staff level agreement with IMF,
03:41the credit worthiness has improved.
03:44And today, the Fitch has increased Pakistan's rating from CCC to CCC+.
03:49Which is the rating of long-term borrowing.
03:51So, in the context of all these things, it was expected
03:54that the interest rate will be reduced.
03:57And this 1% reduction will bring at least a positive sentiment for the market.
04:05So, Mr. Abid Suleri, last time it was said that 150 basis points were reduced.
04:10And this time, 150 basis points have been reduced.
04:13100 basis points have been reduced.
04:15So, this time, how do you see the monetary policy compared to last time?
04:20Because a consolidating policy has been going on for a long time.
04:26Suddenly, I didn't think it was appropriate to lose it in Pakistan.
04:33And I think they did the right thing.
04:35Because our economy still has some chips and butts.
04:39The biggest risk at the moment is political risk and uncertainty.
04:43The second biggest risk is climate change and monsoon rains.
04:47So, in the presence of these risks,
04:49it is obvious that the state bank does not want to take a big daring step.
04:53And because the policy is revised every two months.
04:56If this trend continues like this,
04:58it is possible that after 9 months, you will see some improvement.
05:02So, Mr. Abid Suleri, after this monetary policy,
05:05where do you see the business going?
05:07And tell us about the inflation rate.
05:09How much will it affect?
05:11These are just sentiments.
05:13I mean, there will be positive sentiments in the business sector.
05:161% does not make much difference.
05:18But at least a positive message is going on
05:21that there was a reduction in the previous monetary policy,
05:23and there is still a reduction.
05:24So, there was a very tight monetary policy in Pakistan
05:29and a very high interest rate.
05:31So, it is a very clear indication that there will be a reduction.
05:34And what effect will this policy rate have on the life of the common man?
05:38I do not think that it will have a special effect on the life of the common man
05:43which is reflected in the monetary policy.
05:45Unless you have taken a loan for cars
05:49or you are giving your house mortgage
05:51or using a credit card.
05:53But when there is a reduction in the government's expenses,
05:56which has to be repaid,
05:58then the government definitely has a cushion
06:00so that it can be spent on the common man.
06:02Okay, so next year the GDP growth is expected to be 2.5 to 3%.
06:06Will it be possible?
06:08There are two very important factors on this.
06:11One is the oil prices in the international market
06:14and the second is monsoon and climate change.
06:17And the third domestic factor is our internal political risk with uncertainty
06:22and at the moment the culture of protests in Islamabad and the rest of the country is full.
06:27So, we will have to keep these three factors in mind
06:30to see how far Pakistan can go for its GDP growth.
06:34Thank you very much, Mr. Abiz Hulairi.
06:36You were giving your comment in this regard.
06:38A reduction of 100 basis points has been announced in the interest rate.
06:41And now the current interest rate is 19.5%.