SBP pauses rate cuts, but likely not for long

With inflation cooling, the State Bank of Pakistan (SBP) hit pause on its multiple rounds of monetary easing that might have risked destabilising its currency or worsening the trade deficit. Economists said the government should shift its focus to implementing economic reforms as interest rate cuts are not the elixir for growth, after the central bank on Monday unexpectedly kept interest rates unchanged at 12 per cent. “The rate cuts alone may not meet growth targets,” said Vaqar Ahmed, economist and team lead with Oxford Policy Management. “They need to be complemented by prudent fiscal measures, such as tax reforms, energy sectorviability and privatisation of state-owned enterprises, to encourage private sector investment and prevent crowding out.”