Karachi, April 29, 2024 : On Monday, the State Bank of Pakistan (SBP) opted to maintain the policy rate at 22 percent for the seventh consecutive session.
The announcement followed a meeting of the bank’s Monetary Policy Committee (MPC).
In its statement, the MPC emphasized the importance of maintaining the current monetary policy stance to achieve the target inflation range of 5 – 7 percent by September 2025.
“The macroeconomic stabilization measures have led to significant improvements in both inflation and the external position, amid a modest economic recovery,” the statement read. However, the committee noted that inflation levels remain elevated.
“Simultaneously, global commodity prices seem to have stabilized amidst robust global growth. Recent geopolitical developments have introduced additional uncertainty regarding their future trajectory. Furthermore, forthcoming budgetary measures could impact the near-term inflation outlook,” the statement highlighted.
The committee had previously kept the key policy rate unchanged at 22 percent last month.
Current Account Reports Surplus
The monetary policy committee, in its statement today, observed that data for the first half of fiscal year 2024 indicates a gradual recovery in economic activity, primarily driven by a robust rebound in the agriculture sector.
Additionally, the current account registered a significant surplus in March 2024, which aided in stabilizing the SBP’s foreign exchange reserves despite considerable debt repayments and weak financial inflows, according to the communique.
“Thirdly, consumer inflation expectations edged up in April 2024, while those for businesses declined. Lastly, major central banks, especially in advanced economies, have adopted a cautious policy stance after noting a slowdown in the pace of disinflation in recent months.”
Economic Sector in Actual Terms
Citing data, the MPC reaffirmed the committee’s earlier anticipation of a gradual recovery in the current fiscal year, with real GDP growth forecasted to remain within the 2 to 3 percent range.
“The agriculture sector continues to be the primary driver, experiencing a robust growth of 6.8 percent in H1-FY24. This was supported by a significant increase in rice, cotton, maize, and wheat harvests,” the committee stated, referencing the latest official estimates.
Regarding the industrial sector, the MPC noted a 0.5 percent decline in largescale manufacturing during July-February FY24, compared to a 4.0 percent contraction recorded in the same period last year.
In the services sector, the committee observed that growth in H1 was slightly lower than expected, reflecting the impact of subdued demand.
“Based on relatively improved capacity utilization and business sentiments, as well as a favorable base-effect from last year, the MPC anticipates a recovery in value-addition from both the manufacturing and services sectors in the upcoming months,” the statement concluded.
