‘Cut or no cut’: businesses not on same page over policy rate

The State Bank finds itself in a dilemma over the interest rate as on one hand the business community is clamouring for a cut of 500 basis points in one stroke, but on the other multinational companies are advising caution. According to Ehsan Malik, the CEO of Pakistan Business Council (PBC), “the Monetary Policy Committee (MPC) of the State Bank is likely to maintain a cautious approach and leave the policy rate unchanged for now”. Whilst inflation continues to decline, a key consideration is the forward inflation outlook. On this basis the current policy rate stands at 4pc positive, which the MPC would like to maintain, he added. “The build-up of forex reserves has slowed down. External financing awaits improved credit rating and a favourable outcome of the ongoing IMF review,’ Ehsan Malik said. The demand for imports is rising. It is not clear how tariffs would affect Pakistan’s exports to the US. There is uncertainty about the emerging world order. The continuation of commodity tailwinds cannot be taken for granted.