Published On: Fri, Jan 24th, 2014

State Bank leaves 10 percent rate unchanged

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Corporate News (Pakistan News) state bank

Corporate News (Pakistan News)

Hoping for a moderate inflationary trend, the State Bank on Friday announced a 10 percent rate unchanged for the month of February and March.

Despite the fact of having positive hopes in current Fiscal year ’14, the monetary policy carried some huge and unexpected turn of events. Major factors were concerning the government borrowing from the Central Bank, recurrence of energy circular debt, issues regarding the prolonged time in budgeted inflows of foreign currency and possibility of shortage of tax revenues.

Yaseen Anwar the governor of the SBP said that there has been a fall in marginal propensity to imports which has trickled down the effect of demand-side inflation because of the low international commodity prices. Further he added the effect can be said to be neutralized between Consumer Price Index (CPI) and international prices.

CPI is expected to fluctuate between 10-11% which is higher than their target of achieving an 8% rate.

Significant flows of funds are being expected to be plunged into the economy as proceeds from PTCL privatization, floatation of euro bonds in the international market, and additional flows from programs under IMF will be received.

“There is no room for complacency and considerable effort if required to bring a sustainable improvement in the outlook of external accounts” said the SPB Governor.

Serious issues that need to be reformed are tax, expenditure and debt management.

“A persistently high fiscal deficit had already resulted in accumulation of short term domestic debt at a very rapid pace; 27% on average during the last three fiscal years.”

Investment in private sector was observed to be Rs.161bn whereas Rs.38bn was for fixed investment which is more than double of the last year.

In answer of a question, the Governor said SBP is going to launch T-bills, bonds and Sukuk for trading purposes. Further he told trading of t-bills will be finalized. The government has already annouced selling of t-bills, PIBs and Sukuk in equity market.

In this crucial time swap of currency was of great help which was used to its highest limit. The currency swap was done with China with total amount up to $1.5bm. The Governor added there are terms for exchange of currency are being negotiated with other countries.

To the end he added that though a very few international banks have approached Pakistan, there are many interested to come.

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