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customer service. he believes his key success factors include continued investment in people, systems and capacity building and his insistence on universal best practices at all times.


The Board of Directors of MCB-Arif Habib Savings and Investments Limited (MCBAH) is pleased to present the report on the affairs of MCBAH for the quarter ended September 30, 2022.


The Company is a non-banking financial company, licensed as an asset management company, investment adviser and pension fund manager under the regulatory regime of the Securities and Exchange Commission of Pakistan.


Economics and Money Market Review

The new fiscal year has started with unprecedented rainfall and has added new woes to Pakistan’s already struggling economy. The country experienced 3 times more rainfall than the 30-year average of 135mm, which caused extensive damage to infrastructure, wiped out crops, devastated livestock and resulted in the loss of precious lives. The floods would directly hit our already fragile economy in the form of higher inflation, a widening current account deficit (CAD), fiscal strains and weaker GDP growth in a challenging global landscape.

The main crops affected by the floods are cotton and rice. We expect cotton imports to increase by 2.5 million bales, resulting in an additional import bill of approximately $1.1 billion. Similarly, we expect rice exports to decline by 20%, leading to a drop in exports of $500 million. This would worsen our trade deficit by $1.6 billion. Inflation could also intensify in the short term, as the disruption in the supply chain would cause the price of perishables to rise.

Agriculture contributes about 22.7% of the country’s GDP, livestock having a weight of 14.0% in the overall cake followed by crops with a weight of 7.8%. The floods would reduce the GDP growth figure for FY23 from 0.4% to 2.0%. On the budgetary level, the government will have to increase its expenditure to rehabilitate the populations affected by the floods. This could increase the risk of fiscal slippage and cause us to miss our target of achieving a primary fiscal surplus of PKR 153 billion (0.2% of GDP) in FY23.

The country posted a current account deficit of $1.9 billion in the first two months of fiscal 2023 (2MFY23) compared to a deficit of $2.4 billion in the corresponding period of the year last year, showing a 20% improvement over last year. The narrowing trade deficit was the main contributor to the improvement in the CAD, with an 11.2% jump in exports coupled with a 2.1% drop in imports leading to an 11% contraction in the trade deficit. In addition to the CAD, debt repayments put additional pressure on foreign exchange reserves, which fell another $1.9 billion to $7.9 billion, barely enough for 6 weeks. This led PKR to lose 11% of the ground against the USD to close the quarter at 227 PKR against the dollar.

Headline CPI inflation averaged 25.1% in the quarter, compared to 8.6% in the corresponding period last year. The rise in food prices following the floods, coupled with higher electricity tariffs and higher oil prices, were the main contributors to the rise in the CPI. Inflationary pressure was widespread, resulting in core inflation increasing to 15.7% from 12.3% at the end of the last quarter. The SBP raised its policy rate by an additional 125 basis points in the July-22 monetary policy while maintaining interest rates in the last MPS held in October-22. Fiscally, FBR tax collection increased by 17.1% in the first quarter of FY23 to PKR 1.635 billion from PKR 1.396 billion in the same quarter last year. This exceeded the target of 25 billion.

Secondary market yields rose during the quarter due to monetary tightening and an additional episode of inflationary pressures following the floods Yields on 3-, 6- and 12-month Treasury bills rose by 50, 52 and 44 bases

MCB Arif Habib Savings and Investments Limited