The State Bank of Pakistan’s (SBP) governor, Jameel Ahmad, declared that the Monetary Policy Committee (MPC) had decided to increase the interest rate by 1% to 17%.
He made the announcement at a press conference following the MPC meeting. Most of the increase was expected by the market.
In a separate news release, the central bank emphasized that inflationary pressures continued to be strong and were still present. If they are not addressed, they might contribute to higher inflation expectations for a longer period of time than anticipated. The MPC emphasized that encouraging long-term sustainable growth requires stabilizing price levels and maintaining inflation expectations.
The MPC noted three important economic developments since its previous meeting in November: inflation remained high, with core inflation showing an upward trend over the last 10 months; the near-term challenges for the external sector have gotten worse despite the policy-induced contraction in the current account deficit; and there has been a consistent depletion of foreign exchange reserves.
In his press conference, the SBP head stated that the central bank had previously predicted that the current account deficit would reach $10 billion this year. “Our actual first-half performance has been better than anticipated. The current account deficit from July to December was $3.7 billion despite falling exports and remittances.
“This shows that we are on track. Now, we believe we may be able to bring down the current account deficit to less than $9 billion. Ahmad praised it as a wise decision that would help to reduce the country’s reliance on foreign aid.
In response to another question, he revealed that from January to September 2022, banks had made Rs100 billion in profits due to exchange rate speculation.
He claims that the SBP looked into 13 banks and discovered issues and their root causes. He continued by saying that banks that engaged in speculation might face both regulatory and financial action, and that talks on the best course of action were ongoing and would soon come to an end.