SBP maintains policy rate at 5.75 per cent

KARACHI - The State Bank of Bank of Pakistan (SBP) has announced to keep unchanged the policy rate at 5.75 per cent for next two months.

According to the central bank, "manufacturing activity is expected to benefit from higher development spending, growing investments in CPEC-related projects, improvement in security condition, and the continued trend of stable and low cost of borrowing."

"Based on current projections of agriculture sector growth, GDP growth is likely to reach the annual target of 6.0 percent for FY18 leading to an improved capacity to accommodate rising domestic demand," the SBP added.

The Consumer Price Index (CPI) inflation is expected to remain well below FY18 target of 6.0 percent modest rise in expected inflation during the next six months.

The current account deficit stood at $2.6 billion in the previous two months "primarily driven by higher imports of productive goods, especially of machinery, metal and petroleum products," the statement said, adding that the improvement in these three sectors will "offset the combined impact of healthy growth in exports and workers’ remittances during Jul-Aug FY18".

The inflow of foreign direct investments (FDI) projected at $456 million, "which is more than double the level of inflows in the corresponding period last year".

The SBP predicts exports will increases but imports are also expected to rise due to ongoing CPEC related investments and domestic economic activities, although at a slower pace than in FY17.