KARACHI: The Central Bank of Pakistan (CBP) on Monday announced that the current interest rate will remain unchanged at 7% and expects inflation to remain at 7-9% for FY2021 (FY 21). Have to come within the limits of
The State Bank of Pakistan (SBP) decided to maintain the current interest rate at 7% during a meeting of the Monetary Policy Committee (MPC) earlier today, a statement said.
He observed that since September, “there has been a gradual threat to domestic recovery, which is expected to grow slightly to 2% in FY21, and business sentiment has improved.” However, there are risks to this approach. “
According to the MPC, although COVID-19 cases are on the rise worldwide and in Pakistan, “full implementation around the world may take some time.” [and] There have been recent encouraging news about vaccine development.
Talking about inflation, he said that although food prices were rising, the pressure from supply was likely to be “temporary” and the average inflation in FY21 is expected to be higher than before. The announced limits remained at 7-9%. “Together, the risks to both growth and inflation appear to be balanced,” he said.
“Over the past two months, headline inflation has been close to 7%, mainly due to supply side issues. There has been a sharp rise in selected food items. In contrast, core inflation is relatively moderate. And it has been stable, which is in line with the underlying demand. The economy, “the statement read.
Performance of real sectors
It added that the ongoing monetary policy was conducive to supporting neonatal recovery in light of COVID-19 epidemics and that previous stimuli would “continue to accelerate growth in the areas to come”.
Referring to the real sector, the SBP said the recovery in the construction and manufacturing sectors led to a surge in sales of fast moving consumer goods (FMCG), while sales of POL and automobiles surpassed epidemics. Gone, and the cement is at a height all the time.
It said large-scale manufacturing (LSM) grew by 4.8 per cent year-on-year (compared to 5.5 per cent in the same quarter last year).
The statement added that there has been a significant increase in textile, petroleum products, food and beverage, paper and board, pharmaceuticals, chemicals, cement, fertilizers and rubber products. In addition, an increase in other major crops and higher wheat yields could offset a potential decline in cotton production.
However, the services sector is facing the COVID-19 epidemic due to social distance methods.
Forex reserves rise to .9 12.9 billion
The first quarter of FY21 saw an increase in Pakistan’s current account for more than five years, an increase of 1. 1.2 billion over the same period last year, compared to a deficit of 1. 1.4 billion. The limit has been reached, mainly due to the improvement in trade balance and record remittances.
The SBP revealed that Pakistan’s exports in September and October reached nearly Rs 2 billion, the highest level before the Quaid 19, with the biggest improvement being in the textile, rice, cement, chemicals and pharmaceutical sectors. In addition, suppressing domestic demand and lower oil prices kept imports low.
The SBP said that Pakistan’s foreign exchange reserves have risen to a record high of اعلی 12.9 billion since February 2018, with the current account deficit likely to be below 2% of GDP this fiscal year.
“Despite lower tax revenues, the basic balance grew by 0.6 per cent of GDP in FY21Q1, which was similar to the level achieved during the same period last year,” the central bank said. The bank added that Public Sector Development Program (PSDP) payments have increased by 12.8% (YOY) in the first four months of this year.
From July to October, the Federal Board of Revenue (FBR) tax collection increased by 4.5% (UUY).
According to analysts’ forecasts
Earlier, a majority of analysts said they expected the SBP to maintain the policy rate as it did back in September.
In the easing cycle from March to June 2020, the central bank cut interest rates by 625 basis points to 7% in response to the COVID-19 epidemic and in support of economic growth.
To talk to NewsAnalysts had said that the central bank’s recent estimates indicate that the State of the Economy’s annual report for fiscal year 20 has not changed its policy stance, at least this year.
Analysts say it looks like the SBP will keep its position loose until the economy restores its capacity and the account deficit remains below 2.5 per cent of GDP.
Some analysts also said that the MPC is expected to be cautious and will keep an eye on inflation.