Central Bank expected to keep 14 percent policy rate


Central bank expected to leave its key policy rate unchanged at 14 percent when it meets on Saturday for the subsequent two months because of an improving external current account and some respite in government borrowing.
Pakistan’s current account deficit for July-February period was a provisional $98 million, compared with a deficit of $3.027 billion in the same period last year, which provides a window of opportunity for the State Bank of Pakistan to keep the key policy rate flat. The increase in government borrowing which was as high as 329 billion rupees ($3.86 billion)from July 1 to Dec 11, has now narrowed to 116 billion rupees ($1.36 billion).
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.
Analysts think the State Bank of Pakistan can give priority to economic growth by keeping the key policy rate unchanged as the balance of payments position is also favorable and the rupee has been relatively stable.
Pakistan also announced additional measures last week to cut spending and raise revenue to stabilize the economy and keep the budget deficit under 5.5 percent of gross domestic product in 2010/11.
The central bank decided to leave its key policy rate unchanged at 14 percent in January after raising it three consecutive times.