Pakistan: Central Bank Cuts Policy Rate By 100bps – OpEd
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday, January 27, 2025 in its meeting reduced the benchmark policy rate by 100bps to 12.00%.
The MPC stressed adopting a cautious approach noting that core inflation remains elevated, with high frequency indicators showing gradual improvement. The impact of 1,000bps reduction in the policy rate since June 2024 will continue to unfold, driving growth.
The committee also added that 1QFY25 GDP growth remained below expectations.
Tax collection during 1HFY25 also remained below the target.
Global oil prices remained volatile and that the global economic policy environment has become more uncertain.
Going forward, economic activity is expected to gain more traction with GDP growth for FY25 in the range of 2.5 to 3.5%.
Headline inflation for FY25 is now expected to average between 5.5 to 7.5%, subject to risks from volatile commodity prices, adjustment to energy prices, volatile food prices and impact of revenue measures.
On the fiscal front achieving the target for primary surplus would be challenging, while overall deficit is likely to come close to the target.
Outlook for the current account has improved considerably due to robust remittances. The current account balance for FY25 is anticipated to swing between a surplus and a deficit of 0.5% of GDP.
Like what you read?
Please consider supporting Eurasia Review. Thank you for your consideration!
