Today, the State Bank of Pakistan is set to unveil its monetary policy, with expectations leaning towards a reduction in interest rates across the nation.
The meeting of the Monetary Policy Committee of the State Bank is scheduled for today, followed by the release of the monetary policy through a press announcement. Currently, the interest rate stands at a substantial 22 percent, marking its highest level.
The last gathering of the Monetary Policy Committee resulted in the decision to maintain the policy rate at 22%. This decision was attributed to significant improvements in inflation and external positions, driven by macroeconomic stabilization measures.
However, inflation persists at elevated levels, and uncertainties surrounding geopolitical dynamics, fluctuations in global commodity prices, and forthcoming budgetary measures pose risks to the inflation outlook. The MPC has set a target to lower inflation to a range of 5-7% by September 2025.
Key developments since the previous meeting include a moderate economic rebound, with the agriculture sector witnessing growth of 6.8%.
Furthermore, March 2024 saw a current account surplus of $619 million, buoyed by remittances. Exports demonstrated steady growth while imports declined, leading to a stabilization of foreign exchange reserves. Fiscal consolidation efforts resulted in an improvement in the primary surplus to 1.8% of GDP, notwithstanding increased interest payments due to high debt levels.
Broad money growth reached 17.1% in March 2024, propelled by augmented foreign assets and government borrowing, while private sector credit expansion decelerated.
Inflation moderated slightly to 20.7% in March from 23.1% in February, attributed to stringent monetary and fiscal policies, decreased global commodity prices, and enhanced food supplies. The MPC emphasized the importance of maintaining the current policy stance to sustain the ongoing reduction in inflation.
