Karachi, 23 August 2022 (TDI): The State Bank of Pakistan (SBP) announced to keep its inflation target at fifteen percent for the upcoming two months. This aimed at helping the economy and controlling the inflation.
The SBP anticipated that to stop premium increases for this purpose. This is so because recent inflation trends aligned with expectations.
While consumer spending was starting to slow down and the international position was improving. Moreover, according to the SBP, the termination of the energy subsidy package will continue to show up in inflation results for the remainder of the fiscal year.
It is noteworthy however that, a trend in the prices of staple foods and last month’s exchange currency is weakening.
Additionally, the estimated 1.2 billion dollars from the IMF will act as a spur for funding from bilateral and multilateral lenders. So far, Pakistan has successfully obtained an additional $4 billion from friendly nations, according to the SBP.
Also Read: Is Pakistan’s Economy Recovering?
Aside from that, the Central Bank conveyed in its Monetary Policy Statement.
It stated that “To cool the overheating economy and contain the current account deficit (CAD), the policy rate has been raised by a cumulative 800 basis points since last September, some temporary administrative steps have recently been taken to curtail imports, and strong fiscal consolidation is planned for FY23.” FY23 is the Fiscal year 2023.
Imbalance due to inflation
Besides this, overall, the SBP stated that given Pakistan’s relatively small export share and direct investment inflows into the economy are negatively impacting the world.
Also, a slight global economic slowdown development would not be as detrimental to the country as it would be for almost all other emerging nations.
Moving ahead, as a result, of the decline of global commodity prices, inflation should decrease, although growth would not be as negatively impacted.
Along these lines, in July, the trade imbalance was 2.7 billion dollars, cut in half. The imports fell by 36.6 percent month over month.
This included 10.4 percent year over year as well, while exports likewise decreased by 22.7 percent month over month.
Likewise, due to administrative restrictions, imports have decreased and the rupee appreciated as uncertainties surrounding the International Monetary Fund (IMF) program decreased.
Also Read: IMF approves 1 Billion tranche loan to Pakistan
However, the SBP stated that the administrative policies are not stable and will have to be relaxed in the upcoming months.
The SBP added, “As expected, economic activity has moderated since the last MPC. Most demand indicators have softened sales of cement, POL, fertilizers, & automobiles fell month-on-month in July—& year-on-year growth in LSM almost halved in June”.
Remarks by Acting Governor of SBP on the economic situation
Murtaza Syed, the Acting Governor of SBP claimed that Pakistan had arranged 4 billion dollars in loans from friendly.
He added that “Pakistan will get $2bn from Qatar, $1bn from Saudi Arabia under the umbrella of deferred oil facility and $1bn investments from the UAE in various sectors”.
Furthermore, the high-interest rates that increased the cost of conducting business and rendered exporters and less attractive manufacturers on the global market caused great concern.
