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SBP directs banks to adopt Digital Supply Chain Finance to enhance SMEs’ access to finance

SBP instructs banks to adopt Digital Supply Chain Finance (DSCF) solutions
State Bank of Pakistan has issued instructions to banks to develop and implement digital solutions for supply chain finance within six months to leverage the technology for increasing the SMEs’ access to finance as well as digitizing the retail payments.

The circular issued by SBP require banks to establish effective Supply Chain Finance (SCF) function having suitably trained HR and systems to develop and offer digital SCF products to the SMEs.

The banks have been further advised to either develop their own digital solutions for SCF or partner with any Fintech, Service Providers for providing digital SCF.

The DSCF solutions will not only increase access of SMEs to finance but also improve operational efficiency, reduce costs, and strengthen risk management practices.

Meanwhile, the State Bank of Pakistan reduced the policy rate to 20.5 percent from 22 percent on Monday. This move reflects ease in the rate of inflation which has fallen to below 12 percent last week, from 38 percent this year.
The central bank announced the new discount rate on Monday to reduce the financial burden on the borrowers.

The Committee noted a decline in underlying inflationary pressures supported by a tight monetary policy stance and fiscal consolidation. Core inflation has been moderating, and inflation expectations of consumers and businesses are easing, according to recent surveys. However, the MPC highlighted potential upward risks to near-term inflation stemming from upcoming budgetary measures and uncertainties surrounding future energy price adjustments. Despite these risks, the cumulative impact of previous monetary tightening is expected to keep inflationary pressures in check.

Key developments since the last meeting include moderate real GDP growth of 2.4 percent in FY24, driven by strong growth in agriculture, while industry and services sectors showed subdued recovery. The current account deficit reduction has bolstered foreign exchange reserves to approximately US$9 billion, despite significant debt repayments and weak official inflows. Additionally, the government’s approach to the IMF for an Extended Fund Facility program is expected to unlock financial inflows, further strengthening FX buffers. International oil prices have decreased, while non-oil commodity prices have slightly increased.

Considering these developments, the MPC deemed it appropriate to reduce the policy rate, emphasizing that the real interest rate remains significantly positive to guide inflation toward the medium-term target of 5 – 7 percent. Future monetary policy decisions will remain data-driven and responsive to evolving developments related to the inflation outlook.

In the real sector, Q3-FY24 saw a 2.1 percent real GDP growth, with agriculture and industry showing positive growth. FY24 growth is provisionally estimated at 2.4 percent, largely driven by improvements in agriculture. For FY25, economic growth is expected to remain moderate due to anticipated moderation in agriculture output and ongoing stabilization policies.

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I am an experienced writer, analyst, and author. My exposure in English journalism spans more than 28 years. In the past, I have been working with daily The Muslim (Lahore Bureau), daily Business Recorder (Lahore/Islamabad Bureaus), Daily Times, Islamabad, daily The Nation (Lahore and Karachi). With daily The Nation, I have served as Resident Editor, Karachi. Since 2009, I have been working as a Freelance Writer/Editor for American organizations.

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