VANTAGE

December 16, 2024

Economy: SBP Slashes Policy Rate by 200bps

▪ The State Bank of Pakistan (SBP) slashed the policy rate by further 200bps to Recent MPC Decisions
13%, in-line with our forecast. This is the 5th consecutive time, SBP has Date Stance (bps) Policy Rate
reduced the policy rate since the initial cut in the June’24 Monetary Policy December 16, 24 -200 13.0%
Committee (MPC) meeting, bringing the cumulative rate cuts to 900 bps. November 04, 24 -250 15.0%
September 12, 24 -200 17.5%
▪ The SBP’s decision to reduce rates by 200bps is primarily driven by a rapid July 29, 24 -100 19.5%
decline in inflation which is approaching the medium-term average inflation June 10, 24 -150 20.5%
target of 5-7%. April 29, 24 Unchanged 22.0%
March 18, 24 Unchanged 22.0%
▪ Additionally, the SBP attributed this decline in inflation to the following January 29, 24 Unchanged 22.0%
factors: 1) a significant decline in food inflation, 2) favorable global oil prices, December 12, 23 Unchanged 22.0%
and 3) absence of adjustments in gas tariffs and PDL rates. Source: SBP, Sherman Research

▪ Regarding external debt, the Governor mentioned that the total debt payment
for FY25 is USD26.1bn, of which USD5.5bn have already been rolled over so Real Interest Rate & Headline Inflation (YoY%)
far in FY25 with more loans to be rolled over during the year. Additionally, SBP 40% 12%

expects multi-lateral inflows of USD2bn during the 3QFY24 which will be 30% 4%
offset by the debt re-payment, hence there will be no pressure on FX 20% -4%
Reserves. Moreover, Governor expects FX reserves to reach at USD13bn by 10% -12%
the end of FY25. 0% -20%

May-23

May-24

Dec-24
Jan-23
Mar-23

Jan-24
Mar-24
Nov-22

Jul-23

Nov-23

Jul-24
Sep-23

Sep-24
▪ We believe today’s rate cut signals that the MPC is likely to continue reducing
the policy rate in the upcoming meetings as well amid lower inflation forecast. Real Interest Rate (RHS) Headline CPI (%Y/Y)
We anticipate policy rate to decline to 11% by the end of FY25. Policy Rate (%)
Source: SBP, Sherman Research

Sherman Research is also available on S&P Capital IQ, Thomson Reuters Eikon, FactSet and MG-Link REP-079
MUHAMMAD TAHIR| muhammadtahir@shermansecurities.com | (+92-321) 8182021
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SHERMAN RESEARCH | research@shermansecurities.com | (+92-21) 38284501
 VANTAGE
December 16, 2024

Positive Annualized EPS Impact (Rs) on Major Companies

200bps Policy
450bps Policy Rate Cut Since
Rate Cut
Oct'24 (Rs)
(Rs)
PKGS 14.7 33.0
NRL 7.0 15.6
PSO 3.3 7.4
MUGHAL 1.3 2.9
INIL 1.2 2.8
ASTL 1.0 2.2
ILP 0.7 1.6
PIOC 0.6 1.3
EPCL 0.5 1.1
AGHA 0.5 1.1
EFERT 0.4 0.9
DGKC 0.3 0.8
ASL 0.2 0.5
ISL 0.2 0.5
PAEL 0.2 0.5
POWER 0.2 0.5
FCCL 0.2 0.4
MLCF 0.1 0.3
LOTCHEM (0.0) (0.0)
CHCC (0.1) (0.2)
PPL (0.5) (1.1)
FFC (0.5) (1.2)
OGDC (0.8) (1.8)
LUCK (0.8) (1.8)
POL (1.3) (3.0)
KOHC (1.6) (3.6)
ATRL (9.2) (20.7)
Source: Company Accounts, Sherman Research
Sherman Research is also available on S&P Capital IQ, Thomson Reuters Eikon, FactSet and MG-Link REP-079
MUHAMMAD TAHIR| muhammadtahir@shermansecurities.com | (+92-321) 8182021
Page 2
SHERMAN RESEARCH | research@shermansecurities.com | (+92-21) 38284501
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Rating Interpretation
© Copyright 2024, Sherman Securities (Pvt.) Ltd. Buy ≥ 16.5%
All rights reserved. Sell ≤ -10.0%
Hold Between -10.0% to 16.5%