The decision to keep the policy rate unchanged was taken in view of the fact that the balance of payments position continues to be driven by low financial inflows and high debt payments. While the external current account deficit is expected to widen further in the remaining months of FY13, the net capital and financial inflows are not likely to increase considerably.

In addition, the SBP has to retire another $838 million of IMF loans during the remaining period of FY13 after making payments of $2.2 billion during the first three quarters of the current fiscal year. Due to these developments, the pressure on foreign exchange reserves is likely to remain in the coming months.

It was also observed by the Board that contrary to expectations, the year-on-year inflation has come down by 1.5 percentage points; from 8.1 percent in January 2013 to 6.6 percent in March 2013 posing divergent policy choices for the SBP. While the balance of payments position calls for caution, the declining trend in inflation indicates a possible resumption of ease in the policy rate.

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State Bank of Pakistan (SBP)