SBP holds key rate at record high

Pakistan’s central bank has left its key policy rate unchanged at a record high of 22% for the seventh consecutive time, meeting market expectations. This decision comes ahead of the International Monetary Fund (IMF) executive board’s final approval for the release of the last tranche of $1.1 billion on Monday. While the IMF has consistently advised the central bank to maintain a tight monetary policy, it has refrained from dictating a specific policy rate. The bank is expected to sustain the high policy rate as the government engages in negotiations for a new IMF loan package of $6-8 billion over three years, following the completion of the previous one in April 2024. The government aims to secure a staff-level agreement for the new programme by June-July 2024. Despite a decrease in the inflation rate to a 20-month low of 20.7% in March, resulting in a positive real policy rate of 1.3% after several years, the central bank has chosen to maintain its tight monetary policy.