Pakistan’s net payable obligation of $5 billion for FY25 to be met through official inflows: SBP governor

Pakistan’s net payable obligations of around $5 billion for the remainder of the current fiscal year will be met through official inflows.

“The official inflows are expected to match these payment obligations, hence there will be no pressure on the foreign exchange reserves,” State Bank of Pakistan (SBP) Governor Jameel Ahmed said at an analyst briefing post the monetary policy statement announcement on Monday.

Ahmed highlighted that the total payment obligation for fiscal year 2024-25 (FY25) stands at $26.1 billion. He mentioned that a significant portion of these obligations will be rolled over, with substantial rollovers expected to be completed by next month and continuing until March.

He projected inflows of $2 billion over the next quarter, which aligns closely with the official repayments of $2 billion, indicating no anticipated pressure on the reserves.

"We are confident that payments will be made without any pressure on reserves," he stated.

The central bank governor noted an increase in inflows from the private sector, including remittances and other sources, over the past month and continuing into the current month. This trend is expected to help further build up the country's reserves.

Addressing inflation, Ahmed predicted that it would ease in the coming months — followed by a temporary increase — before eventually stabilizing at a rate of 5-7%.

He pointed out that the Karachi Interbank Offered Rate (KIBOR) and secondary market yields are currently lower than policy rates, which is expected to encourage businesses to plan for expansion.

Ahmed also informed that the government had allocated PKR 9.8 trillion for interest payments for the current fiscal year when the interest rate was between 16-17%. With interest rates now on a downward trajectory, this will significantly reduce the government's debt servicing costs.

He emphasized that interest payments would be substantially lower.

Ahmed acknowledged that inflation had decreased significantly, attributing this to the volatile components of food and energy. However, he noted that core inflation remains high and sticky. "We will continue to monitor this situation," he assured.

It may be mentioned here inflation has now fallen to single digits, having peaked at 38% in May 2023. Since then, all components, including food, core, and energy inflation, have eased.

Ahmed expressed optimism that this trend would continue, with core inflation decreasing faster than in emerging and advanced economies. He also highlighted improvements in the Purchasing Managers' Index (PMI) and business confidence.

Looking ahead, SBP projected a 12.6% growth in exports for FY25. Moreover, the number of workers going abroad compared to last year increased, with remittances expected to maintain a robust trend. The GDP growth for FY25 is anticipated to exceed 3%.