SBP cautions on rising economic risks – Alfalah Securities Limited

Karachi: The State Bank of Pakistan (SBP) has released 2nd Quarterly Report for FY12 wherein it has cautioned on the rising risks to macroeconomic stability.

According to Alfalah Securities Limited, as per the report, the weak economic scenario would lead to lower than projected GDP growth and is likely to stay around 3‐4% against the estimates of 4.2% for FY12. Likewise, FY12 inflation will fall within the range of 11‐12%. The government borrowing from the central bank reached PKR 219.2 billion by the end of 2nd Quarter FY12 against the commitment of zero quarterly borrowing limit from SBP. In order to curtail budget deficit at 4.7%, which was revised from 4%, the central bank has recommended realisation of Coalition Support Fund (CSF) and the auction of 3G licences besides strict control over government expenditures. On the external side, the financial and capital inflows are on a decline therefore, funding the rising current account deficit would be challenging. Furthermore, the scheduled repayment of IMF loans amounting USD 1.1 billion during 2HFY12, may drag down SBP’s foreign exchange reserves and in turn may lead to devaluation of Pak Rupee.