SBP increases policy rate by 50 basis points from April

SBP increases policy rate by 50 basis points from April
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State Bank of Pakistan has announced to increase policy rate by 50 basis points from next month.

According to a monetary policy statement issued by State Bank of Pakistan in Karachi today (Friday), the current account deficit recorded a sizeable contraction during the first two months of 2019, which, together with bi-lateral inflows, helped ease pressures on SBP’s foreign exchange reserves.

It says these developments on the external front have improved stability in the financial markets, reduced uncertainty and improved businesses confidence, as reflected in various surveys.

The statement says, the current account deficit remains high, fiscal consolidation is slower than anticipated, and core inflation continues to rise.

Average headline CPI inflation reached 6.5 percent in Jul-Feb FY19 compared to 3.8 percent recorded in the same period last year.

It says with an improvement in the external balance as well as an increase in bilateral official inflows, SBP’s foreign exchange reserves gradually recovered however the reserves are still below the standard adequacy.

It says in view of the shortfalls in revenue collections and escalating security related expenditures it is most likely that the target for the fiscal deficit in FY19 would be breached.

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