Pakistan's Economic Balancing Act: Navigating Inflation, Interest Rates, and IMF Reforms

Pakistan's central bank halts its monetary easing amidst inflation control. Economists advise economic reforms beyond interest rate adjustments. The central bank's unexpected rate hold aims to prevent currency destabilization and trade deficits, stressing the need for fiscal measures to boost investment while navigating a $7 billion IMF program for economic revival.

Pakistan's central bank has decided to pause its monetary easing policy, a move aimed at preventing potential destabilization of its currency and worsening of the trade deficit as inflation cools. On Monday, the bank unexpectedly kept the interest rate unchanged at 12%, breaking from what was the country's largest monetary easing cycle.

Economists emphasize that while inflation is under control, mere interest rate cuts won't spur growth. They urge the government to focus on implementing crucial economic reforms. 'The cuts need prudent fiscal measures, including tax reforms and energy sector changes,' said Vaqar Ahmed of Oxford Policy Management.

Despite initial growth indicators being below target, the fiscal year holds potential according to central bank chief Jameel Ahmad. However, challenges persist with rising energy tariffs and fiscal austerity needs, compounded by a significant trade deficit increase and continued hurdles in reviving consumer demand.

(With inputs from agencies.)