SBP Forecasts Rs2.4 Trillion Profit for Fiscal Year 2024-25

KARACHI: The State Bank of Pakistan (SBP) has projected a profit of Rs2.4 trillion for the fiscal year 2024-25, as disclosed in a post-policy rate briefing to financial analysts, according to The News.

Strong Performance Despite Dip from Last Year

Although the projected profit is lower than the record-breaking Rs3.42 trillion generated in FY2023-24, the SBP’s expected earnings for FY25 are still considered substantial. The previous year’s exceptionally high earnings were mainly due to elevated interest rates and significant gains from currency exchange movements.

Annual Profit Transfer Under Revised Law

In line with amendments made to the SBP Act in 2022, the central bank will now transfer its annual profits to the federal government once per year instead of doing so quarterly. The profit for FY25 will be handed over after auditing and board approval in the early months of FY2025-26. This estimated amount has already been included in the government’s FY26 budget planning.

Policy Rate Held Steady Amid Inflation Risks

During its most recent monetary policy meeting held on Monday, the SBP decided to maintain the policy rate at 11%, citing persistent inflationary threats driven by ongoing geopolitical instability in the region, particularly the Iran-Israel tensions. In May, the SBP cut the policy rate by 100 basis points, responding to a visible slowdown in inflation.

Economic Targets and Agricultural Uncertainty

The SBP acknowledged that the federal government’s GDP growth target of 4.2% for FY2025-26 is achievable but may face obstacles, especially due to potential volatility in the agricultural sector.

Sectoral Drivers of Growth

According to a research note by Arif Habib Limited, the SBP foresees that the industrial and services sectors will be the primary contributors to economic growth in the coming fiscal year. Indicators supporting this view include a resurgence in imports, recovery in the automobile industry, increasing capacity utilization, improved labor market sentiment, and a Purchasing Managers’ Index (PMI) consistently above 50 since December 2024.

July Outlook to Cover Key Economic Indicators

The SBP plans to release its comprehensive economic outlook report in July, which will detail projections related to GDP, inflation, foreign reserves, and the current account balance. The central bank reiterated its commitment to providing evidence-based projections rather than setting rigid targets.

External Debt Update and Future Repayments

SBP Governor Jameel Ahmad revealed that of the total $25.8 billion in external debt due in FY25, the majority has either been repaid or successfully rolled over. Only $400 million remains outstanding and is expected to be cleared within the next two weeks. A similar volume of repayments is expected for FY26, with more specifics to be shared in the upcoming Monetary Policy Committee (MPC) meeting in July 2025.

Foreign Reserves to Reach $14 Billion

The central bank anticipates that its foreign exchange reserves will grow to $14 billion by the end of June, driven by scheduled foreign inflows. A current account surplus is also projected for FY25, which will enhance Pakistan’s external financial position heading into FY26.

Remittances Surge Due to Formal Channel Shift

Workers’ remittances are expected to climb to $38 billion in FY25, a significant increase from $31.3 billion recorded last year. This boost is attributed to a large one-time movement of remittance flows from informal to formal channels. The SBP, in collaboration with the government and banking sector, is developing new incentives to promote and sustain this shift.

Liquidity Management and OMO Trends

The SBP observed a recent uptick in Open Market Operations (OMO), which it attributed to higher cash demand during the Eid period and a temporary lag between outgoing payments and incoming foreign currency inflows. However, the central bank expects liquidity levels to normalize as foreign funds start arriving.

On Track with IMF Reserve Commitments

The SBP confirmed that it is on course to meet its Net International Reserves (NIR) target for June under the IMF-supported program. Notably, the NIR benchmark set for December 2024 was already exceeded by a substantial margin, highlighting improved reserve management.