The State Bank of Pakistan Saturday (today) has announced new monetary policy for the next two months.
According to the new monetary policy the interest rate is maintained at 5.75 per cent.
While the Central Bank has been following a loose monetary policy for the last two years, its effects have not been reflected in the overall growth ranging from exports to the domestic economy.
Exports dipped by 8.3%YoY to US$22bn in FY16, vs US$24bn in the previous year (FY15).
While credit growth has witnessed expansion in FY16, initial months of FY17 have recorded significant retirement of private sector credit.
Despite lower energy and commodity prices, inflation in the first two months was recorded at 3.8%, up from last full year average of 1.83%.
Importantly, government borrowing composition from the SBP has completely changed, where it has preferred to borrow directly from SBP.
Since the government has decided not to enter into the next IMF program, analysts noticed significant slowdown and reversal in the reform processes like government borrowings, energy reforms, tax reforms, privatization and re-structuring of loss making public sector enterprises.
