by ESP_Admin


by ESP_Admin


Pakistan’s central bank has opted for stability! In a move that may surprise some, interest rates will remain unchanged at 22%. This decision comes amidst ongoing talks with the IMF and recent economic developments. Let’s delve into the reasoning behind this hold and what it means for Pakistan’s future.

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has kept the key policy rate unchanged at 22%, its sixth successive decision to maintain the status quo.

  • At its meeting today, the MPC decided to keep the policy rate unchanged at 22%, as it said in a statement on Monday i.e, March 11, 2024
  • In approaching the decision, the MPC noted that inflation, in line with earlier expectations, has begun to decline noticeably from H2-FY24.


1. Background

Market experts Business Recorder reached out to earlier were divided, with some anticipating the MPC to maintain the status quo as Pakistan is engaged in talks with the International Monetary Fund (IMF), which has historically advised caution in monetary easing.

Some had said that developments, including a fall in CPI inflation, a manageable current account deficit, stable local and international oil prices, and the currency, could be factors advocating a rate cut.

Mohammed Sohail, CEO of brokerage house Topline Securities, said: “We believe that the SBP will remain cautious despite the above-mentioned encouraging trends and adopt a ‘watch and see’ approach until the inflation trend maintains its fall.

In its previous meeting on January 29, the MPC of the SBP had kept the key policy rate unchanged at 22%, which was in line with market expectations.

The MPC noted that “the external account (position) has become better.”

The MPC also revised its inflation projection for the fiscal year 2023-24 from 20-22% to 23-25%, considering the latest round of energy tariff hikes.

Since the last MPC in January, several key developments on the economic front have taken place.

The rupee appreciated a marginal 0.3%, while petrol prices increased around 6%.

Internationally, oil prices remain volatile amid an escalation of tensions in the Middle East.

The Consumer Price Index (CPI)-based inflation clocked in at 23.1% on a year-on-year basis in February, according to the Pakistan Bureau of Statistics (PBS), much lower than the reading in January, when it stood at 28.3%.

In addition, Pakistan posted a current account deficit of $269 million in January 2024, against a surplus of $404 million in December 2023.

Foreign exchange reserves held by the SBP increased by $17 million every week, clocking in at $7.91 billion as of March 8, data released on Thursday showed.

The total liquid foreign reserves held by the country stood at $13.15 billion. Net foreign reserves held by commercial banks stood at $5.24 billion.

2. Pakistan Holds Steady: The central bank Has a key interest rate

Pakistan’s central bank, the State Bank of Pakistan (SBP), has decided to keep its key interest rate unchanged at 22% for the sixth consecutive meeting. This decision comes amidst mixed signals about the country’s economic outlook.

3. Inflation Down, But Still High

On the positive side, inflation has begun to show signs of decline, dipping to 23.1% in February compared to 28.3% in January. However, the central bank remains cautious as inflation is still well above its target range of 5–7% by September 2025.

4. External Factors and Policy Concerns

The bank is also mindful of external risks, including rising oil prices and ongoing tensions in the Middle East. Additionally, any further adjustments in administered prices or government spending that could push inflation up are seen as potential threats.

5. Balancing Act

The decision to hold the rate reflects the central bank’s desire to strike a balance. While lower inflation suggests room for easing, but the bank wants to ensure inflation stays downward and doesn’t rebound. This cautious approach aims to achieve the target inflation range by September 2025.

6. Market Divided

Market experts had differing opinions on the rate decision. Some anticipated a hold due to ongoing talks with the IMF, which traditionally advocates caution on monetary easing. Others saw the decline in inflation and a manageable current account deficit as arguments for a rate cut.

7. Looking Ahead

The central bank’s next move will likely depend on how inflation behaves in the coming months. While a rate cut is possible in the future, the bank seems committed to a gradual approach to ensure long-term economic stability.

Additional Notes

  • Pakistan’s foreign exchange reserves have shown some improvement.
  • The country is nearing a staff-level agreement with the IMF.


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