Karachi November, 26 2021: WTI crude has fallen over 13% on the session, diving to near three-month lows of $67.42, after closing at $77.41 on Thursday. The new Covid variant discovered in South Africa has been the driver of losses, as it remains unclear at this juncture whether the strain will be able to circumvent current vaccines.
Airline stocks, and indeed all travel related stocks have tanked today, with the new variant having the potential to destroy a lot of oil demand. BioNTech, in partnership with vaccine maker Pfizer, said today it will have data on the new strain within two-weeks, and would be able to redesign its vaccine within six-weeks, with initial batches available in 100 days.
The State Bank of Pakistan (SBP) on last Friday raised its benchmark interest rate by 150 basis points to 8.75 per cent as it grapples with surging inflation and uncertainty over the stalled International Monetary Fund (IMF) loan facility.
Much needed sell-off in commodities. This will help to keep the growth momentum going, and government will be able to recover its budgeted PDL & Sales tax on petroleum products. On external front, the decline in commodities prices will help SBP to keep preserving its hard earned foreign exchange reserves built up.
Says Muzzammil Aslam Spokesperson to the Finance Minister
The State Bank of Pakistan (SBP) on Friday raised its benchmark interest rate by 150 basis points to 8.75 per cent as it grapples with surging inflation and uncertainty over the stalled International Monetary Fund (IMF) loan facility.
The SBP further noted that inflationary pressures had increased considerably since the last MPC meeting, with headline inflation rising from 8.4pc year-on-year in August to 9pc in September and further to 9.2pc in October. It said this increase was mainly driven by higher energy costs and a rise in core inflation.
Hence “looking ahead, global commodity prices and potential further upward adjustments in administered prices of energy pose upside risks to the average inflation forecast of 7-9pc in FY22,” it said.
The SBP’s warning comes as high inflation continues to hit the country’s sizeable poor and middle classes as prices for essentials such as food and fuel climb ahead of the cooler winter months.
With regards to the fall of the rupee, the SBP said the currency had depreciated by 3.4pc since the last MPC meeting in September.
“The US dollar also appreciated against most emerging market currencies since May as expectations of tapering by the federal reserve have been brought forward,” it noted. “However, the fall in the value of the rupee since May has been comparatively large. As other adjustment tools normalise, including interest rates and fiscal policy, pressures on the rupee should abate.”
Moreover, “persistently high” international commodity prices and strong domestic activity kept the current account deficit elevated at $3.4 billion in the first quarter of FY22, the SBP said.
“The deficit widened to $1.66bn in October from $1.13bn in September due to high energy prices and an uptick in services imports, despite some moderation in non-energy imports. There was also a moderate month-on-month decline in exports and remittances.”
According to the SBP, the current account deficit for FY22 is expected to modestly exceed the previous forecast of 2-3pc of the GDP.
The SBP has been grappling with the falling rupee, high inflation and a current account deficit, while investors have become nervous over the outcome of talks between the government and the IMF, which has delayed the release of the next tranche of a $6 billion loan facility.
