SBP cuts auto financing tenure
In a bid to arrest the fast depleting foreign exchange reserves, the State Bank of Pakistan (SBP) has decided to reduce the auto financing tenure.
In a circular issued on Tuesday, the central bank underlined that the maximum tenure of auto financing facility was reduced from five to three years for vehicles above 1,000cc engine capacity.
Moreover, for vehicles up to 1,000cc engine capacity, the financing tenure had been brought down to five years from seven years, it added.
On May 23 (Monday), the monetary policy committee decided to raise the policy rate by 150 basis points to 13.75 percent.
“This action, together with the much-needed fiscal consolidation, should help moderate demand to a more sustainable pace while keeping expectations anchored and containing risks to the external stability,” an SBP spokesperson said.
IT incentive package on the cards
An incentive package is expected to be announced for the information technology and telecom sector in the upcoming budget to give a big push to IT exports and meet the remittances target of $15 billion in the next two years.
These incentives include exemption from duties and taxes on the establishment of cloud infrastructure. The IT ministry has submitted the proposals to the Federal Board of Revenue (FBR).
Other proposal is the grant of 0.5 percent of annual IT export revenue to the Pakistan Software Export Board (PSEB) for promoting exports.
The ministry also requested the government to exempt the telecom sector from the State Bank of Pakistan’s (SBP) regulation of 100 percent Letter of Credit (LC) margin, which was announced on April 7, 2022.
Islamic banks to outpace conventional ones
The banking sector is on the rise in Pakistan, but Shariah-compliant banks are leapfrogging and set to outpace the conventional banks in the coming years, as more banks are anticipated to apply for Islamic banking licences.
The Shariah-compliant banks are not only progressing at a faster pace because there is huge demand for interest-free banking, but also “Islamic banking institutions in Pakistan are more profitable than their conventional counterparts and their loan performance is better,” Moody’s Investors Service said in a commentary titled “Pakistan’s Islamic banking industry continues its strong growth trajectory” on Tuesday.
“We expect growth in Islamic banking to continue to materially outpace conventional banking, reaching a market share of total assets and deposits of around 30 percent by end-2026, with net financing market share at around 33 percent. We estimate average growth over 2021-2026F to range between 25 percent and 28 percent for total assets and deposits, and over 20 percent for net financing.”
Chinese IPPs face default risk
Power projects of the China-Pakistan Economic Corridor (CPEC) face further risk of default on the upcoming debt repayments, as their outstanding dues have jumped above Rs340 billion amid Pakistan’s back-pedaling on fulfilling its contractual obligations.
Owing to the gravity of the situation, Prime Minister Shehbaz Sharif is expected to hold a meeting to find solutions to the chronic issues that have affected the pace of work on the multibillion-dollar initiative of Chinese President Xi Jinping.
Official documents showed that 11 Chinese power companies were facing serious issues due to the mishandling of their investment by the Pakistani authorities. Of these, eight independent power plants (IPPs) were waiting for the clearance of their cumulative dues of Rs340 billion to cover the cost of power generation.
Rupee slides to 202 as uncertainty plagues markets
The Pakistani rupee hit a new all-time low on Wednesday, reaching Rs202 against the US dollar for the first time in inter-bank market.
The country’s capital markets continued to plunge as the ousted Pakistan Tehreek-e-Insaf (PTI) began its long march to the federal capital amid the coalition government’s crackdown on party workers and leaders in an attempt to stop the party from marching on to Islamabad.
Rupee slumped Rs1.08 to a historic low of Rs202.49 against the greenback just before noon, cumulatively losing over Rs16 against greenback in the past 14 working days.
The Pakistan Stock Exchange sank 1.22 percent (or 513 points) to a one-year low, at 41,438 points at noon as well.
SPI increases 1.42pc
The Sensitive Price Indicator (SPI) for the week ended May 19, 2022 registered an increase of 1.42 percent for the combined income group, going up from 172.63 points during the week ended May 12, 2022 to 175.08 points in the week under review. The SPI for the combined income group rose 16.54 percent compared to the corresponding week of previous year. The SPI for the lowest income group increased 1.46 percent compared to the previous week. The index for the group stood at 184.69 points against 182.03 points in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics (PBS). During the week under review, average prices of 33 items rose in a selected basket of goods, prices of four items fell and rates of remaining 14 goods recorded no change.
Seizure of containers to hurt trade, business
Businessmen of the capital city have shown concern over the seizure of loaded containers by the government authorities to tackle the long march, fearing that the practice will hurt trade and industrial activities and cause shortage of goods in the manufacturing units as well as markets.
In a statement, Islamabad Chamber of Commerce and Industry President Muhammad Shakeel Munir pointed out that every day a large number of containers “bring goods from Karachi to Islamabad and northern areas including perishable items, but whenever a long march or sit-in is planned in Islamabad, the loaded containers are seized”.
He argued that the unloading of perishable items and other goods on their way without reaching the destinations would create shortage of fruits, vegetables and other items.