Pak central bank maintains policy rate status quo for sixth straight meeting

Pakistan’s central bank held the key interest rate at a record high of 22 per cent for a sixth straight meeting, as a newly-elected government holds talks with the IMF to determine whether the country has met conditions for receiving the much needed final USD 1.1 billion tranche of the bailout.

The State Bank of Pakistan (SBP) has kept the status quo on its key policy rate at 22 per cent for the sixth policy meeting in a row.

The bank announcing the 22 per cent rate would continue was the first taken by the newly elected government, which is facing major decisions to overcome an economic crisis and also ensure the release of the US 1.1 billion disbursement of funds by the International Monetary Fund (IMF) under the current Stand-By Arrangement (SBA). The IMF has approved a USD 3 billion bailout for cash-strapped Pakistan.

Pakistan media reported on Tuesday that the talks held on the last review between the new financial Czars of the elected coalition government and IMF representatives on the SBA have been extended by a day.

The IMF team will hold another round of meetings with the Pakistan government on Tuesday to ensure a consensus for the release of the fund.

In a statement, the SBP said the central bank’s Monetary Policy Committee (MPC) had met and reviewed the current economic developments.

Regarding the decision to maintain the status quo, the committee noted that although inflation had declined noticeably, it still remained “high, and its outlook is susceptible to risks amidst elevated inflation expectations”.

The cental bank said, however, data showed a moderate pick-up in economic activity.

It said that the better-than-anticipated external current account balance helped maintain foreign exchange buffers despite weak financial inflows.

Financial analysts said the SBP decision to maintain the status quo was expected in the market.

“The IMF has asked for a tight policy while holding the review talks,” Intikhab of Topline Securities said.

“The market is expecting the central bank to start monetary easing in April “when inflation is likely to have slowed to 20pc” Pakistan’s current foreign exchange reserves barely cover two months of imports which is why the new government is desperate for the IMF to release the third tranche of the loan.

A market analyst said the IMF team also does not want a further devaluation of the US dollar against the rupee as this could impact both imports and exports.

The dollar fell to a five-month low against the rupee on Friday to Rs 278.77, causing serious concerns for exporters. There are fears in the government that a cheaper dollar could lead to higher imports, which may disturb the current equilibrium between imports and exports.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)