Pakistan ‘poised for rate cut and selloff of key industries’
FINANCE MINISTER SAYS GOVERNMENT WILL RESUME SELLING INTERNATIONAL BONDS
Pakistan’s Finance Minister Ishaq Dar said the central bank is likely to cut interest rates again at its next meeting, helping to boost the nation’s stocks.
In an interview in London on Wednesday, Dar also said the government is committed to its privatisation programme and may be able to sell Pakistan Steel Mills Corp and the core unit of Pakistan International Airlines Corp by the end of 2015. The government expects to return to international debt markets in the fiscal year starting July 1, he said.
Pakistan’s benchmark stock index rose 0.8 per cent at 10:24am local time, headed for the highest close in a month, on Dar’s rate cut outlook and steady oil prices, Qasim Shah head of international equity at AKD Securities said in an email.
Pakistan’s inflation rate was 2.49 per cent in March, the lowest since 2003, while the State Bank of Pakistan’s discount rate stands at 8 per cent following a 50 basis point cut on March 21. The nation has benefited from the decline in oil prices over the last year.
No prediction
“I think any sensible calculation would expect a further cut in the next meeting” in early May, Dar said. The central bank is independent, he noted, and declined to predict the size of a rate reduction to avoid a perception of interference.
Dar, 66, is leading Prime Minister Nawaz Sharif’s national economic recovery plan and raising funds from equity and bond sales to narrow the budget deficit. The government forecasts the shortfall will contract to 4.9 per cent of gross domestic product this fiscal year, from 5.5 per cent in the year before.
The government plans to sell international debt in the new fiscal year, Dar said. In 2016, some outstanding international bonds will mature, he said. “Surely we will be back with our friends in the international market” when that occurs, he said. The government wants to sell both traditional bonds and sukuk, he said, declining to specify a quantity.
“We have a firm commitment to implement the privatisation agenda” even in the face of potential opposition to the sale of state companies over possible job losses, Dar said.
The government is seeking a strategic partner to take a 26 per cent stake in the core airline activities of PIA, he said.
“The whole idea is to expand,” Dar said. “It will be better for the employees of PIA if the airline does well.”