The State Bank of Pakistan (SBP) on Monday chose to maintain the status quo by upholding the key policy rate at 22 per cent for the seventh policy meeting in a row.
Monetary Policy Committee (MPC) emphasized the necessity of continuing the current monetary policy stance, aiming to bring inflation down to the target range of 5-7% by September 2025. It cited factors such as global commodity price stabilization, recent geopolitical events, and upcoming budgetary measures as contributors to the inflation outlook.
While inflation remains high, the MPC noted a noticeable moderation in the second half of the fiscal year, with headline inflation declining to 20.7% year-on-year in March. This decline, coupled with other factors including lower global commodity prices and improved food supplies, has contributed to a favorable outcome.
The MPC highlighted the considerable improvement in both inflation and external positions, attributing it to macroeconomic stabilization measures amidst moderate economic recovery. Economic activity, particularly in the agriculture sector, has been recovering at a moderate pace.
Moreover, the current account recorded a sizable surplus in March 2024, aiding in stabilizing the SBP’s foreign exchange reserves despite substantial debt repayments and weak financial inflows.
The committee deemed it prudent to maintain the policy rate unchanged, considering the inflation outlook’s susceptibility to risks such as global oil price volatility and fiscal consolidation measures. This decision follows the sixth consecutive meeting where the policy rate remained at 22%.
The announcement precedes Pakistan’s nearing completion of a $3 billion standby arrangement (SBA) secured from the International Monetary Fund (IMF) last year. The IMF Executive Board is expected to meet later today to decide on the final tranche of $1.1 billion.
