(Bloomberg) — Pakistan’s central bank held its benchmark interest rate for a fourth straight meeting ahead of the International Monetary Fund’s nod for a $700 million loan payout.
The State Bank of Pakistan maintained the target rate at 22%, according to a statement on Tuesday. Of the 21 analysts surveyed by Bloomberg, 20 predicted a hold, while one forecast a cut.
“The Committee assessed that the current monetary policy stance is appropriate to achieve the inflation target of 5%-7% by end-FY25,” the central bank said.
High borrowing costs will curb demand, tame Asia’s fastest inflation and support a weaker currency. Pakistan’s inflation rate rose to 29.23% in November, driven by higher energy costs. The nation’s currency declined about 20% against the dollar this year and the losses are seen extending into 2024.
Price gains are expected to decline from January next year on easing supply constraints, moderation in international commodity prices and a favorable base effect, the central bank said.
The IMF’s executive board will meet on Jan. 11 to give final approval for a second payout under Pakistan’s $3 billion loan program. The South Asian country may seek a fresh loan from the Washington-based lender as it faces about $1 billion dollar-denominated debt due next year, interim finance minister Shamshad Akhtar said last month.
While tepid official inflows since July and ongoing debt repayments have led to a gradual decline in the foreign exchange reserves, the successful completion of IMF’s first review would unlock financial inflows, said the statement.
Funds from the lender will help shore up the economy that is still fragile and boost foreign exchange reserves, which cover less than two months of imports. It will also provide some comfort for Pakistan’s interim government, whose term ends in February as the country votes in national polls to elect a new administration.
Pakistan, which has raised rates by a cumulative 600 basis points since January, now ranks fourth on the list of world’s 50 central banks that have made the biggest rate changes this year, according to data compiled by Bloomberg.
Source: Finance Yahoo