Interest rate stability in Pakistan is contrary to expectations

The Central Bank of Pakistan on Thursday kept the key interest rate unchanged for the second time in a row, despite the IMF’s conditions for tightening monetary policy in Pakistan, ahead of the review of Pakistan’s reform program next November.

The IMF is calling on the Central Bank of Pakistan to take decisive action to rein in inflation, which over the past five months has reached its highest level in Asia.
The Bloomberg News Agency noted that the central bank has raised the interest rate by 600 basis points since last January as part of Pakistan’s pledges to obtain a loan from the IMF worth 3 billion dollars.
The bank said in a statement today that the monetary policy committee decided to keep the key interest rate at the level of 22%, while 4 out of 41 analysts polled by Bloomberg were the ones who expected to keep the interest rate while others expected to increase it.
At the same time, the Central Bank of Pakistan expects inflation rates to rise during September, while they are expected to decline next October, according to the monetary policy statement announced by the bank in Karachi.
The “Bloomberg” News Agency reported on Thursday that the expected decline is due to the improvement in agricultural production, and the steps taken against speculation in the foreign exchange and commodity markets.
The outlook for the agriculture sector has also improved due to the arrival of the cotton crop.
It is worth mentioning that achieving the primary surplus target of 4.0% is crucial in order to support the monetary position.