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Pakistan Government Set fiscal Policy Key Rate Steady

The State Bank of Pakistan left its key policy rate unchanged at 9.75% on January 24th of 2022, citing no more monetary tightening was needed due to the government’s fiscal policy.

The central bank Governor added that the mid-year budget passed earlier in the month and the end of exemptions on sales tax would translate in a smaller fiscal deficit and soften demand, ultimately easing the momentum of inflation to a more sustainable pace.

Still, the central bank said high inflation rates will linger in the near-term due to rising global commodity prices. Policymakers also expected the non-oil current account to reach a surplus in FY22, while the overall current account deficit seemed to have stabilized since November. Looking ahead, the annual inflation rate is forecasted to hover the upper limit of the 9%-11% range target in FY22 and to ease to 5%-7% in FY23, while new GDP projections see FY22 growth at 4.5% from a prior estimate of 5.0%.

Source: State Bank of Pakistan

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