Karachi, Pakistan (BBN)- The central bank of Pakistan has decided to keep its policy interest rate unchanged at 13 percent for the next two months to the end of November this year.
The decision was taken at a meeting of the central board of directors of the State Bank of Pakistan (SBP) held at the central bank headquarters in Karachi on Tuesday with its Governor Syed Salim Raza in the chair.
“….there will be no change in the SBP’s policy rate, which will remain at 13 percent. These issues are likely to determine SBP’s policy trajectory in the coming months,” the SBP, the country’s central bank said in a report.
The central bank also said sustainable recovery of real sector of the economy would not be possible without revival of business environment and availability of credit to private sector, which in turn depends on the elimination of electricity shortages among other factors.
“Moreover, stagnant private sector investment can hurt the potential output of the economy, adversely impacting inflation persistence,” it said, adding that recent steps taken towards resolution of the circular debt issue could lead to the resumption of private sector credit in the coming months.
There are some risks to inflation while the economy gradually stabilizes. Moreover, uncertainty regarding the outcome of ongoing fiscal consolidation, resolution of electricity problem, and timing of official foreign inflows call for prudence at this point, the SBP noted.
The meeting also decided to constitute a nine-member Monetary Policy Committee (MPC) comprising SBP governor, Deputy Governor Yasin Anwar, Economic Advisor Riaz Riazud Din, Executive Director Asad Qureshi and Director Monetary Policy Hamza Ali Malik.
This committee will also include the representatives of SBP Board of Directors Mirza Qamar Baig and Tariq Saeed Sehgal, While, Dr Abdul Hafeez Pasha and Shahid Kardar will be on the committee as external members.
The committee will start its deliberations in November 2009. “To harmonize the constitution of MPC with the legal framework of SBP and make it fully independent, amendments in the SBP Act have already been submitted for the legislative process,” the central bank added.
BBN/SS/SI/AD-30September09-2:36 am (BST)