The State Bank of Pakistan (SBP) on Tuesday said it is keeping the policy rate unchanged at 9.75 per cent.
SBP Governor Reza Bakir said in a press conference in Karachi, ‘There is no need to tighten the government’s fiscal policy.
Last month, the central bank increased The policy interest rate changed 100 basis points from 8.75 per cent and the revised outlook for inflation, current account deficit and growth target and rising import bill changed.
The bank had hiked rates by 275 basis points before September to tackle depreciating rupee, high inflation and current account deficit. However, in December it indicated that it expected the monetary policy setting to remain “largely unchanged” in the near future.
Addressing the press conference today, Bakir said that the central bank’s Monetary Policy Committee (MPC) has recently taken several measures in an effort to reduce inflation and make gross domestic product (GDP) growth more sustainable. . ,
“These measures include raising the interest rate to 2.75 per cent from September, while the cash reserve requirement for banks was also raised. In addition, measures were taken to moderate consumer finances,” he said.
He said that in the December meeting, the MPC wanted to see the impact of these measures before taking a decision on the policy rate.
Commenting on Pakistan’s economic outlook, Bakir said there has been some moderation in demand growth. He added that headline inflation (Y-o-Y) will still remain high due to commodity prices in the international market.
“But if we look further, we see that inflation projections have come down,” he said.
The governor of the central bank said that there has been some reduction in indicators of economic activity such as large-scale manufacturing.
LSM growth was 2.5 per cent in September and 0 per cent in November. Similarly, if you look at the other indicators, you will see some softening compared to the way they were rising.”
The SBP governor said this was “good news” and showed that growth was sustainable.
Commenting on inflation, he said the latest headline number was 12.3 per cent year-on-year. “But if you compare it with the previous months, it shows that the pace of inflation is slowing down.”
He further said that the current account deficit (CAD) is also showing stability, due to which it will start reducing now. “In the last two months, CAD was $1.9 billion and did not move forward.”
He said the CAD for the current financial year is estimated to be around 4 per cent of the GDP.
Bakir said the recently passed Finance (Supplementary) Bill would reduce the fiscal deficit and lead to a marginal increase in demand.