2023-10-26 09:26:42
Pakistan’s central bank is expected to maintain rates at a meeting on Monday, according to a majority of analysts polled by Archyde.com, as the country awaits its first review following securing a loan from the International Monetary Fund.
The South Asian country embarked on a difficult path to economic recovery under an interim government following the IMF approved a $3 billion loan program in July that helped avoid a default on sovereign debt, but the conditions of which have complicated efforts to control inflation.
The first IMF review under the program is scheduled to begin on November 2.
The median estimate in a Archyde.com poll of 15 analysts forecast no rate change on Monday. Two of the 15 analysts expected a rate cut of 50 and 100 basis points each.
“The central bank cannot maneuver inflation in the short term (especially on the supply side) with further rate hikes. Demand destruction has already happened,” said Muhammad Ali, analyst at AKD Securities.
Pakistan’s inflation rate increased from 27.4% in August to 31.4% in September as the country faced rising fuel and energy prices.
Inflation has been in double digits since November 2021. The country was targeting inflation of 21% for the current fiscal year, but it reached an average of 29% during the first quarter.
“The State Bank of Pakistan is expected to maintain interest rates at current levels as real rates are comfortably in positive territory at 12 months,” said Tahir Abbas, head of research at Arif Habib Ltd.
“Additionally, the IMF’s first review is scheduled for early November, before the SBP maintains interest rates at their current levels,” he added.
The SBP kept its key interest rate unchanged at 22% at its September meeting, surprising analysts who had expected it to raise rates by at least 150 basis points.
The SBP maintained its rates for two consecutive meetings following increasing them by 12.25 percentage points in a series of hikes since April 2022.
The Pakistani government is trying to reduce fuel prices and implement a price control mechanism to curb inflation, caretaker Prime Minister Anwaar ul Haq Kakar said earlier this month.
The worsening economic situation and rising political tensions ahead of national elections scheduled for November have sparked sporadic protests in September, with many Pakistanis saying they are struggling to make ends meet.
For individual survey responses, see the table below:
# Organization Waiting
1 AKD Securities 0
2 Ammar Habib 0
3 Arif Habib Limited 0
4 EFG Hermes 0
5 FRIM Ventures 0
6 Ismail Iqbal Securities 0
7 JS Capital 0
8 Lakson Investment 0
9 Multiline Securities -100
10 Pak Kuwait Investment Company 0
11 Spectrum Securities 0
12 Topline Securities 0
13 Tresmark 0
14 Uzair Younus 0
15 Vector Securities -50
Median 0
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