{"id":11671,"date":"2024-01-26T20:49:48","date_gmt":"2024-01-26T15:19:48","guid":{"rendered":"https:\/\/asia.businessupturn.com\/?p=11671"},"modified":"2024-01-26T20:49:48","modified_gmt":"2024-01-26T15:19:48","slug":"pakistans-central-bank-expected-to-maintain-interest-rates-steady-ahead-of-elections","status":"publish","type":"post","link":"https:\/\/www.businessupturn.com\/asia\/south-asia\/pakistan\/pakistans-central-bank-expected-to-maintain-interest-rates-steady-ahead-of-elections\/11671\/","title":{"rendered":"Pakistan\u2019s central bank expected to maintain interest rates steady ahead of elections"},"content":{"rendered":"

Pakistan\u2019s central bank, the State Bank of Pakistan (SBP), is poised to keep its key interest rate unchanged at 22% during its fifth consecutive policy meeting on Monday. Despite calls for a potential rate cut due to easing inflation, analysts foresee the SBP maintaining its stance to signal a commitment to controlling inflation and honouring conditions set forth by the International Monetary Fund (IMF).<\/span><\/p>\n

The decision, amidst Pakistan\u2019s $3 billion Standby Arrangement (SBA) with the IMF, marks the final monetary policy move under the caretaker government before the election. While the IMF bailout has staved off a sovereign debt crisis, some of its stipulations, including fiscal adjustments and monetary tightening, have exacerbated inflationary pressures in the economy.<\/span><\/p>\n

Nine out of ten analysts anticipate the SBP holding rates steady, with only one outlier predicting a 50 basis point cut. Ali Farid Khwaja, co-founder of KTrade, emphasized the importance of not sending the wrong signals to the IMF and demonstrating seriousness in tackling inflation. The SBP raised its key rate to a record high of 22% in June last year, reflecting efforts to stabilize the economy amid IMF negotiations.<\/span><\/p>\n

Sami Tariq, head of research at Pak Kuwait Investment Company, offered a contrasting view, advocating for a 50 basis point rate cut, citing positive real interest rates on a forward-looking basis. However, the broader sentiment aligns with maintaining the status quo to adhere to IMF conditions and ensure economic stability.<\/span><\/p>\n

The IMF\u2019s stringent requirements, including revenue generation through taxation and fiscal adjustments, have contributed to soaring inflation rates, reaching 38% year-on-year in May and persisting above 30%. Despite mounting pressure from businesses for relief in the form of rate cuts, analysts caution against deviating from the agreed-upon reform program.<\/span><\/p>\n

Khurram Husain, an economic analyst and journalist, highlighted the lack of justification for rate cuts and emphasized the IMF\u2019s cautionary stance against premature easing. Nonetheless, prospects for relief emerge as inflation is projected to gradually decline, according to the Institute of International Finance (IIF). The IIF anticipates average inflation rates of 24% for the current fiscal year and 14% in the fiscal year 2024-25, although challenges such as a depreciating currency and rising energy prices persist.<\/span><\/p>\n

The decision-making authority of the caretaker government, led by Prime Minister Anwaar ul Haq Kakar, has been bolstered by recent legislation, allowing for policy decisions on economic matters. While the central bank maintains operational independence, the caretaker government\u2019s role in economic policy highlights the imperative of adhering to IMF conditions to secure continued financial support.<\/span><\/p>\n

As Pakistan approaches the polls on February 8, the central bank\u2019s decision to maintain interest rates reflects a delicate balance between economic stabilization and political exigencies. With inflationary pressures persisting and IMF commitments looming large, the SBP\u2019s resolve to uphold monetary discipline underscores its commitment to navigating the country\u2019s economic challenges amidst the electoral backdrop.<\/span><\/p>\n

\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"

The decision, amidst Pakistan\u2019s $3 billion Standby Arrangement (SBA) with the IMF, marks the final monetary policy move under the caretaker government before the election. <\/p>\n","protected":false},"author":429,"featured_media":11672,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17],"tags":[312,7226,85,6943,7725],"class_list":["post-11671","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-pakistan","tag-imf","tag-international-monetary-fund-imf","tag-pakistan","tag-prime-minister-anwaar-ul-haq-kakar","tag-the-state-bank-of-pakistan-sbp"],"reading_time":"3 min read","_links":{"self":[{"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/posts\/11671","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/users\/429"}],"replies":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/comments?post=11671"}],"version-history":[{"count":0,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/posts\/11671\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/media\/11672"}],"wp:attachment":[{"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/media?parent=11671"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/categories?post=11671"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.businessupturn.com\/asia\/wp-json\/wp\/v2\/tags?post=11671"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}