SBP projects record Rs2.4tr profit for FY25 ending this month

The central bank's profit projection is lower than the record profit of Rs3.42 trillion in the last fiscal year (FY24) due to higher interest rates and exchange gains.

According to the SBP, its profits will be transferred to the government after an audit and approval from the board in the early fiscal year 2026 (FY26).

This amount has been validated by the SBP and is included in the FY26 budget.

Following the amendment to the SBP Act in 2022, profits are now transferred annually instead of quarterly.

The SBP, on Monday, kept the policy rate unchanged at 11%, flagging the risk of accelerating inflation amid rising geopolitical tensions.

It warned that the conflict between Israel and Iran added uncertainty to Pakistan's economic outlook.

It had lowered the interest rate by 100 basis points (bps) to 11% in its last meeting on May 5, mainly owing to steady disinflation.

The SBP thinks that while the 4.2% GDP growth target for the fiscal year 2025–26, which begins in July, is deemed achievable, it remains difficult, mostly because of risks in the agriculture sector.

The bank stated that economic growth is expected to be driven by the industrial and services sectors, according to Arif Habib Limited’s note, citing analysts' briefing.

This growth is supported by strong import volumes, a recovery in auto sales, rising capacity utilisation (as indicated by surveys), improving employment sentiment, and a Purchasing Managers’ Index (PMI) that has remained above 50 since December 2024.

Additionally, the SBP plans to release its own economic assessment in July, which will include projections for GDP, inflation, the current account balance, and foreign exchange reserves.

It is important to note that the SBP does not set specific targets but instead provides an evidence-based assessment.

The SBP’s governor highlighted that the total repayment for the fiscal year 2025 amounted to $25.8 billion, most of which has already been paid or rolled over.

The remaining amount of $400 million will be settled within the next two weeks.

Looking ahead to the fiscal year 2026, the governor indicated that external debt repayments are expected to be roughly the same.

However, more details will be provided in the upcoming Monetary Policy Committee (MPC) meeting, which is anticipated to take place by the end of July 2025.

He noted that some inflows are expected this month, which will help maintain the target for foreign exchange reserves at around $14 billion by the end of June this year. The SBP anticipates a current account surplus for FY25, with improved external buffers entering FY26.

Remittances for FY25 are projected to reach $38 billion, an increase from $31.3 billion last year. This $7 billion rise is primarily attributed to a one-time shift from informal to formal channels.

Incentives are being developed in collaboration with banks and the government to encourage this trend of formal inflows.

The SBP confirmed that it is on track to meet the June target for net international reserves (NIR) under the International Monetary Fund (IMF) loan programme. Additionally, the target for December 2024 was exceeded by a significant margin.

The SBP reported that the stock of open market operations (OMO) increased mainly for two reasons: a rise in currency circulation during Eid (which is a temporary effect) and a time lag between debt repayments and incoming inflows. However, OMO levels are expected to decline in the coming weeks as these inflows materialise.