SBP may revise policy rate downwards by end-Jan, claims govt’s finance team

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ISLAMABAD:The government’s economic team has informed the federal cabinet that the policy rate, which is currently at 13.25pc, may witness a downward revision by the end of the current month.

According to sources, the expected decrease in the policy rate would enhance private businesses’ appetite for credit, which was almost curbed due to the eight-year high policy rate in vogue.

Sources said the government’s economic team, while briefing the cabinet last week, had made tall claims of putting the economy on the right track, saying, “With the stabilisation of macro-economic indicators, the policy rate will be revised downward in the coming months to spur credit offtake by the private businesses.”

Upon this, the cabinet members had raised concerns over rising inflation, declining large-scale manufacturing activity and low offtake of credit by private businesses.

The economic team, in reaction to the criticism from the cabinet members, had shifted the blame on the policies of the previous government, explaining that since the previous government had not revised electricity tariffs for 18 months, the legacy liability resulted in a sudden and substantive increase in electricity rates, which in turn fueled inflation.

However, it admitted that rise in SPI inflation, especially of locally produced food items, was worrisome. “But this is more due to supply shock rather than an increase in electricity tariff.”

The economic team urged the provincial governments to improve their oversight to check against hoarding and ensure an abundant supply of locally produced food items.

It was further clarified that the lacklustre performance of the real sector was expected in the face of the government’s contractionary policies to immediately address the current and fiscal account deficit.

The cabinet members expressed satisfaction over the macro-economic indicators, noting that the country’s economy has been stabilised and was now at the take-off stage.

It is pertinent to mention that Prime Minister Imran Khan, while chairing the cabinet meeting, directed the economic team to present a report on the performance of the agriculture sector in the next meeting.

The cabinet desired that future briefing on key economic indicators should also include agriculture sector data, as it has a bearing on other sectors as well.

4 COMMENTS

  1. SLOW MOTION movement policy of PTI govt, may it be downward revision in policy rate, or say criminal negligence on transporters/truck owners strike and many others alike are damaging the economy,an irreparable loss to the country.

  2. Downward revision will hit the rupee very hard so I don’t think the SBP will do it. Besides the government has to increase utility prices a lot more in order to pare down the circular debt. This will impact inflation going forward.

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