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Saturday, April 13, 2024

SBP prepones MPC meeting to March 2

Amid the prevailing economic crisis, there is an urgent need to unlock the critical funding of IMF, State Bank of Pakistan has called the Monetary Policy Committee meeting for this week on March 2.

“The forthcoming meeting of the Monetary Policy Committee(MPC)  has been preponed and now it will be held on Thursday, March 02, 2023,” the bank announced on its official Twitter account.

Earlier the meeting was scheduled for March 16 and it has now been rescheduled to March 2 for the policy review as Pakistan desperately needs IMF’s economic bailout.

Read more: SBP increases interest rates by 17%

The MPC was established under the SBP’s Amendment Act, to take a decision keeping in view the macroeconomic fundamentals for the IMF’s $ 1.12 tranche. It is expected that SBP will raise benchmark interest rates as the rise in treasury yields in the last auction hinted towards market weighing-in.

Furthermore, official sources suggest that the government has agreed to hike the interest rate by 2% to 19% from 17% to satisfy the IMF in order to revive the loan program. The bank needed to bring forward the MPC review meeting as the country cannot afford a failure in the next T-bill auction.

Read more: Tax the rich, support the poor, IMF chief asks Pakistan

The Fund and the SBP had held a round of talks about the possibility of further tightening monetary policy and building up foreign exchange reserves by the end of June 2023. 

Additionally, the Fund had conditioned SBP for jacking up the policy rate by 300 to 400 basis points in order to move towards the interest rate from a negative to a positive trajectory.

Therefore, the cash-strapped country is undertaking key measures to secure IMF funding which includes raising taxes, removing blanket subsidies, and artificial curbs on the exchange rate. Meanwhile, the government is optimistic about having a deal with IMF soon. 

Read more: Dar presents PKR 170 billion ‘Mini Budget’ to unlock IMF package

The Head of Research at Ismail Iqbal Securities, Fahad Rauf said; 

“Pakistan has two core inflation readings i.e., urban (15.4% for Jan-23) and rural (19.4%), and no national core number is released. If the SBP tries to bring rates above rural core inflation, it requires a rate hike of 200-300 bps,”