State Bank of Pakistan Governor Dr Shamshad Akhtar says July inflation data will be vital for deciding her monetary policy guidance over the next six months. "Data of July 2007 will be critical for us to determine whether our current monetary policy stance is appropriate," Dr Akhtar said in an interview with Bloomberg in London, before the policy review at the end of next month.
"Clearly, we have to keep the monetary policy in its existing, current tight phase." Pakistan's government, bracing for upcoming elections, this month said inflation will exceed its 6.5 percent target for 2007 on rising food costs.
Pakistan's $146 billion economy expanded 7 percent in the year ended June 30, from 6.6 percent in previous 12 months, according. Higher consumption spurred by economic growth, salary increases and food subsidies in June 9, 2007 Budget will have to be managed through interest-rate policy.
State Bank has also asked the government to reduce borrowing from SBP and set an upper limit for next fiscal year, she said. Pakistan plans to increase development spending by 25 percent to Rs 520 billion ($8.6 billion) in the year starting July 1.
Consumer prices in South Asia'second-largest economy rose 7.41 percent in May from a year ago, following a gain of 6.92 percent in April. Food prices rose 11 percent last month as shoddy roads and markets made it harder for farmers to get their produce to Pakistan's cities. "There are lots of administrative supply measures that are needed to bring down food prices," including building new roads, Dr Akhtar said.
Overseas investors have opportunities to invest in infrastructure projects valued at $150 billion in Pakistan in next 10 years, Dr Akhtar said. Pakistan's textile industry is open for mergers and acquisitions, she said.
SBP Governor expects more mergers and acquisitions in Pakistan's banking industry as smaller lenders meet central bank's capital requirements. HSBC Holdings Plc, world's third-largest bank by market value, and Citigroup Inc, biggest financial firm, are looking at opportunities for acquisitions in Pakistan, she said. Standard Chartered Plc in September completed a $487 million purchase of Union Bank Ltd, biggest acquisition in Pakistan's banking history. In March, ABN Amro Holding NV purchased a 93.4 percent stake in Pakistan's Prime Commercial Bank Ltd for $227 million.