The State Bank of Pakistan (SBP) on Tuesday “advanced” its Monetary Policy Committee (MPC) meeting to March 2 – which was initially scheduled for March 16 – in another much-awaited move. had lived. International Monetary Fund (IMF) installment.
“The next meeting of the Monetary Policy Committee has already been scheduled and will now be held on Thursday 02 March 2023,” the central bank announced on its official Twitter handle.
The forthcoming meeting of the Monetary Policy Committee has been preponed and now it will be held on Thursday, March 02, 2023. pic.twitter.com/555JOhCFoe
— SBP (@StateBank_Pak) February 28, 2023
State Bank Chief Spokesperson Abid Qamar had earlier said that no meeting of the MPC has been held since last month’s meeting.
The MPC was established under the SBP Amendment Act, which is empowered to take decisions keeping in mind macroeconomic fundamentals.
The market expects the SBP to hike benchmark interest rates as the rise in Treasury yields at the last auction pointed to market concerns weighing on the economic front with investors increasingly cautious across the world as well as in Pakistan. Noting the rising inflation, Arif Habib Limited said in a comment released earlier.
Additionally, sources told JEE News last week that the coalition government has raised the interest rate from the current level of 17 percent to 19 percent as part of a major condition offered by the fund to revive the loan program. What is agreed?
However, analysts were of the view that the SBP needs to bring forward the date of the MPC meeting as the finance ministry cannot afford a failure in the next T-bill auction.
It may be noted that the fund and the central bank had held a round of talks till the end of June 2023 on the possibility of tightening monetary policy and increasing foreign exchange reserves.
The IMF had also asked the State Bank to increase the policy rate by 300 to 400 basis points to move interest rates from negative to positive momentum.
The cash-strapped country is taking key steps to secure IMF funding, including raising taxes, removing blanket subsidies, and artificially fixing the exchange rate. While the government expects a deal with the IMF soon, media reports say the agency expects to raise policy rates.
However, off-cycle rate reviews are not unusual in Pakistan.
Adnan Shaikh, assistant vice president of research at Pak-Kuwait Investment Company, said a rate hike is imminent.
Fahad Rauf, head of research at Ismail Iqbal Securities, said the IMF has set a target of keeping the minimum rate higher than core inflation.
“Pakistan has two core inflation readings namely urban (15.4% Jan-23) and rural (19.4%) and no national core number has been released. If it tries, it needs a rate hike. 200-300 bps,” he said.
Muhammad Ayub Khoro, a fund manager at a local fund, said that recent economic data on government finances indicated that the cash balance with its central bank was declining.
“This is why the government went ahead with its desired targets, despite the fact that it would send a signaling effect to the markets,” Khoro said.
“The government has effectively bypassed the central bank to accept higher cut-offs to meet IMF conditions,” he added.
