Pakistan’s Monetary Policy is being held ransom to PTI diktats


Pakistan’s economy continues to remain in doldrums and at a time like this it is critical that the State Pakistan of Pakistan take a firm monetary policy decision. Unfortunately, SBP continues to keep its policy rate unchanged. This is despite market expectations in a volatile global and domestic economic environment.

As an editorial in Dawn noted, “The decision to hold the rate is widely speculated to have been driven by the present challenges facing the government amid the opposition’s move to remove the prime minister rather than by economic considerations. It can only be hoped that this was not the case.”

Further, “There are multiple reasons for the market’s skepticism of the SBP decision. For starters, the Russia-Ukraine conflict has created uncertainty in international commodity markets and rattled the global financial situation. This could exacerbate Pakistan’s current account deficit and stoke higher inflation than is anticipated. Likewise, the market doesn’t seem to agree with the SBP reading of the Rs246bn energy price relief as “fiscal deficit neutral”. On top of that, the anticipated delay in the conclusion of the ongoing review of the IMF program on the new tax amnesty and relief package and growing political instability in the country aren’t helping at all.”

Finally, the editorial recommends that “to avoid adding to the monetary policy uncertainty, the SBP should have either increased the rate to tackle global and domestic trends or kept from cautioning about a possible hike before the next meeting.”

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