Islamabad, Nov 23 (TNS): State Bank of Pakistan in its monetary policy has decided to retain the policy rate at 13.25 percent.
According to SBP, the decision reflects the Monetary Policy Committee’s view that recent developments have had offsetting implications for the inflation outlook.
According to a press release issued in Karachi today the causes behind these out-turns have primarily been increases in food prices which are expected to be temporary.
It said market sentiment has begun to gradually improve on the back of sustained improvements in the current account and continued fiscal prudence.
It said that the current account balance recorded a surplus in October 2019 after a gap of four years, a clear indication of receding pressures on the country’s external accounts together with the end of deficit monetization has qualitatively improved the inflation outlook.
It said that recent economic data suggest that economic activity is strengthening in export oriented and import competing sectors while inward oriented sectors continue to experience a slowdown in activity.
Specifically, large-scale manufacturing (LSM) shows gains in electronics, engineering goods and fertilizer sectors and decline in auto, food, and construction allied industries of steel and cement.
The latest production estimates of major kharif crops suggest that agriculture sector is likely to grow in line with projections although cotton production is likely to remain below target.
The external sector continued to show steady improvement, reflecting the benefits of recent policy adjustments and other factors. In the first four months of the current fiscal year, the current account deficit contracted by 73.5 percent to 1.5 billion dollars.
This improvement reflected a notable reduction in imports, a modest growth in exports and steady workers’ remittances.