ISLAMABAD: The State Bank of Pakistan, in a monetary policy statement, has decided not to change its policy rate at 10 percent for the next two months.
As Pakistan has rebuilt its foreign exchange reserves, the rupee remained stable during the recent few months. However, the currency started losing its value last month after Pakistan Tehreek-e-Insaf (PTI) Chairman Imran Khan and Pakistan Awami Tehreek chief Dr Tahirul Qadri began sit-ins in the federal capital demanding the resignation of Prime Minister Nawaz Sharif.
The pressure on the exchange rate and increasing demand and low supply of the greenback was the reason that has forced the State Bank to keep the prevailing interest rate unchanged.
Moreover, the discount rate is unchanged at 10 percent since November 2013; even traders criticised it severely due to single-digit inflation.
Financial experts were of the view that recent floods, which were making a devastating impact on major crops, like cotton, rice and sugarcane, could push inflation higher in the coming months.
“Pending International Monetary Fund (IMF) tranche is another reason that has forced the central bank to follow the IMF measure of keeping the real interest rate on positive side,” they said.
They also said that IMF is not ready to release pending tranche until Pakistan raises electricity and gas tariffs, which has already increased suffering of the consumers.
On the other hand, the federal government has been facing serious political challenge with sit-ins and it may not take the risk at this moment to increase the electricity and gas tariffs, which will cost its already decreasing popularity.