The Monetary Policy Committee meeting has been announced by the State Bank of Pakistan (SBP) for March 2 — two weeks earlier than originally planned — and it is anticipated that the main policy rate will be increased at this meeting.
The SBP issued a brief statement saying, “The upcoming meeting of the Monetary Policy Committee has been preponed and will now be held on Thursday, March 02, 2023.”
The Monetary Policy Committee of the central bank was previously slated to convene on March 16. Off-cycle rate reviews are nevertheless common. Pakistan is undertaking key measures to secure International Monetary Fund (IMF) funding, including raising taxes, removing blanket subsidies, and artificial curbs on the exchange rate. While the government expects a deal with the IMF soon, media reports say that the agency expects the policy rate to be increased as well.
The policy rate, which is currently at 17%, is expected to increase by at least 200 basis points, according to market participants in a recent treasury bill auction. The rates the government established in the auction to raise the funds are the foundation for the anticipated hike.
On February 22, the government held an auction in which it raised Rs258 billion. The three-month, six-month, and 12-month tenor cut-off rates increased by 195 basis points, 206 basis points, and 184 basis points, respectively, from the previous auction.
Since January 2022, the SBP has increased rates 725 bps; the most recent increase was 100 bps in January. The bank had stated at the time that the action was intended to combat rising inflation.
But immediately after that, January’s annual inflation rate registered at 27.5 percent, a five-decade high.
It is anticipated that the Consumer Price Index would increase by close to 30% in February as a result of the recent increases in petrol prices and the general sales tax, which have not yet been fully accounted for.
