KARACHI: State Bank of Pakistan (SBP) left its key policy rate unchanged at 14 percent for the next two months because of a smaller current account deficit and lower government borrowing, it said in a statement on Saturday.
"Given a favourable external current account position and relatively disciplined government borrowings from the SBP, the immediate risks to macroeconomic stability seem to have subsided, at least for the next two months," the SBP said in a statement.
Current account deficit for July-February was a provisional $98 million, compared with a deficit of $3.027billion in the same period last year. Government borrowing from the state bank, which was running as high as 329 billion rupees ($3.86 billion) from July 1 to Dec11, has now fallen to 116 billion rupees.
The consumer price index in February rose 12.91 percent from a year ago, but was down 0.74 percent from January because of a decrease in food prices.
State Bank, however, warned that risks to the economy may increase if "meaningful economic reforms" are not taken to address structural weaknesses. While the government's borrowing from the SBP has been relatively restrained, its total borrowing from the central bank and commercial banks is still very high, with 329 billion rupees borrowed from July 1 to March 12.
"Not only are urgent measures required to address the energy crisis to increase productive activity but the fiscal position also needs considerable strengthening to cope with rising debt obligations and to ease borrowing pressures on the banking system," the SBP said. (Reuters)
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