KARACHI: The State Bank of Pakistan’s Monetary Policy Committee (MPC) has announced a 250 basis points cut in the policy rate, lowering it from 17.5% to 15%, effective November 5, 2024. This decision marks the fourth consecutive reduction in interest rates as inflation continues to decline, reaching close to the medium-term target range in October.
In its statement, the SBP highlighted that recent developments, including a significant drop in food inflation and favorable global oil prices, have contributed to this downward trend. The MPC noted the importance of a tight monetary policy in sustaining inflation reduction and acknowledged the role of external support, including the IMF’s approval of Pakistan’s new Extended Fund Facility program, in improving the macroeconomic outlook.
Economic indicators show a gradual recovery, with better-than-expected Kharif crop yields and a pick-up in industrial activity, particularly in textiles and automobiles. The SBP expects real GDP growth for FY25 to be in the range of 2.5% to 3.5%.
The external sector also displayed resilience, with the current account posting a surplus for the second consecutive month, largely due to robust remittances and exports. This has helped bolster foreign exchange reserves, which increased to $11.2 billion as of October 25, 2024.
While the fiscal sector showed improvements with recorded surpluses, the MPC emphasized the need for continued fiscal reforms to maintain stability and growth. Despite recent successes, challenges remain, including ensuring adequate tax collection to meet FY25 targets and managing inflationary pressures.
Overall, the MPC views the current monetary policy stance as essential for achieving sustainable price stability while supporting economic growth in the coming months.
