Karachi March 23 2023: On March 22 2023, SBP raised above target amount of PKR 1,140.7 billion through the auction of market treasury bills at all time high rates and 200 basis points above the policy rate of 20 percent, according to State Bank of Pakistan.
The government received total bids worth PKR 1,491 billion and the highest bids of PKR 1,052 billion for 3 Month T-bills followed by PKR 286 billion for 12 Months and PKR 152.5 billion for 6 Months.
The cut-off yield for 3 Months, 6 Months, and 12 Months paper settled at 21.9995 percent, 21.9901 percent, and 21.4899 percent, respectively. Cut-off yields increased by 100, 114 and 50 basis points for 3 Month, 6 Month, and 12 Month T-Bills, respectively.
Despite record high bids from commercial banks and other financial institutions the government raised more than targeted amount, raising PKR 1,140.7 billion in the latest auction against a target of PKR 1,000 billion.
State Bank of Pakistan Monetary Policy Committee to hold its next meeting on April 4, 2023.
The Monetary Policy Committee (MPC) in its meeting held on 2nd March 2023, decided to increase the policy rate by 300 basis points to 20 percent as the MPC noted that the recent fiscal adjustments and exchange rate depreciation have led to a significant deterioration in the near term inflation outlook and a further upward drift in inflation expectations, as reflected in the latest wave of surveys.
The Committee expected inflation to rise further in the next few months as the impact of these adjustments unfolds before it begins to fall, albeit at a gradual pace. The average inflation this year is now expected in the range of 27 - 29 percent against the November 2022 projection of 21 – 23 percent. In this context, the MPC emphasized that anchoring inflation expectations is critical and warrants a strong policy response.
On the external side, the MPC noted that despite a substantial reduction in the current account deficit (CAD), vulnerabilities continue to persist. In January 2023, the CAD fell to $242 million, the lowest level since March 2021. Cumulatively, the CAD – at $3.8 billion in Jul-Feb FY23 – is down 68 percent compared to the same period last year. Notwithstanding this improvement, scheduled debt repayments and a decline in financial inflows amid rising global interest rates and domestic uncertainties, continue to exert pressure on FX reserves and the exchange rate.
The MPC noted that FX reserves remain low and concerted efforts are needed to improve the external position. In this regard, conclusion of the ongoing 9th review under the IMF’s EFF will help address near-term external sector challenges.