ISLAMABAD, Dec. 16 (Xinhua) -- The State Bank of Pakistan (SBP) announced on Monday a cut in the policy rate by 200 basis points to 13 percent with effect from Tuesday in light of declining inflation and improved economic indicators, said a statement.
According to the SBP, the Monetary Policy Committee (MPC) decided on the new policy rate after headline inflation declined to 4.9 percent year on year in November 2024, primarily due to easing food inflation and the fading impact of last year's gas tariff hikes.
The SBP said that the core inflation remained sticky at 9.7 percent, and consumer and business inflation expectations continued to fluctuate, fearing that the inflation might remain volatile in the near term.
The SBP added that the current account surplus for the third consecutive month, rising foreign exchange reserves, favorable global commodity prices, and increased credit to the private sector have bolstered the macroeconomic outlook.
Improved prospects in the agriculture and industrial sectors are driving optimism about economic growth, said the central bank, adding that cotton arrivals and encouraging data on wheat crop sowing, along with robust performance in large-scale manufacturing, signaled a stronger outlook for the current fiscal year starting from July 2024 to June 2025.
The bank projected gross domestic product (GDP) growth in the current fiscal year to reach 2.5 percent to 3.5 percent.
On the external front, the current account remained surplus from July to October, driven by robust workers' remittances and export growth of 8.7 percent, said the bank, expecting its foreign exchange reserves to exceed 13 billion U.S. dollars by June 2025.
According to the central bank's report, the fiscal sector also showed improvement, with the revenue of the Federal Board of Revenue increasing by 23 percent year-on-year from July to November 2024.
The SBP emphasized that the recent easing of financial conditions led to accelerated credit growth, supporting private sector activity. It hopes that the current momentum could foster an improved macroeconomic environment in the months ahead. ■