SBP keeps interest rate unchanged at 22%
On October 30, 2023, Pakistan's central bank opted to
maintain its key interest rate at 22%, aligning with market expectations,
following its policy review earlier in the week.
This decision coincides with an impending visit from a
delegation representing the International Monetary Fund (IMF) to assess
progress on targets established in a $3 billion bailout program approved in
July, aimed at stabilizing Pakistan's ailing economy.
State
Bank of Pakistan increases interest rate to 17pc
The State Bank of Pakistan, in a statement, affirmed that
the Monetary Policy Committee (MPC) underscored the importance of adhering to
the current stringent monetary policy stance. Despite a rise in headline
inflation in September, the central bank anticipates a decline in October and a
continued decrease in the subsequent months.
Earlier, the central bank had projected a decrease in
inflation for the current financial year, starting on July 1, with an expected
average of approximately 20% to 22%, down from 29.2% in the previous financial
year (2022-2023).
In September, inflation surged to 31.4%, driven by a
substantial increase in fuel prices. However, the government subsequently
reduced pump prices. The inflation data for October is expected later this
week.
State
Bank of Pakistan keeps policy interest rate steady at 22%
The IMF forecasts a 25.9% inflation rate for this year and
has recommended maintaining mildly positive interest rates. The central bank's
chief has previously mentioned that the IMF has not explicitly called for
interest rate hikes but has supported an assertive policy stance. He also
indicated that the central bank had met key IMF targets ahead of the visit.
In its preceding two meetings in July and September, the
central bank opted to retain the key interest rate, having previously raised it
by 12.25 percentage points to 22% through a series of hikes since April 2022.
Pakistan's currency, which experienced a significant decline
in August, has made a substantial recovery against the U.S. dollar following
measures to curb black market trading. This action has contributed to taming
inflation.
A swift and successful review by the IMF remains crucial for
Pakistan, which narrowly averted a default on debt obligations earlier in the
year thanks to a last-minute new agreement replacing an incomplete and stalled
program.
Sustained external funding is essential to meet numerous
financial commitments in the current financial year. Pakistan is counting on
investments from Middle Eastern allies like Saudi Arabia and the United Arab
Emirates.
Additionally, Pakistan is banking on the realization of
funds pledged by bilateral and multilateral donors for reconstruction efforts
following devastating floods in 2022.
Source: https://www.marketscreener.com/