KARACHI: The meeting of the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) will be held on Monday to decide about the Monetary Policy.

In the previous monetary policy meeting held in July 2022, the committee increased the benchmark policy rate by 125 basis points (bps) to 15 percent. In addition, it linked the interest rates of Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) with policy rate and offered a discount of 500 bps relative to the policy rate to incentivize exports.

Most analysts are expecting no change in the upcoming monetary policy to be announced on August 22, 2022. They said that a key development in the economy recently witnessed is on the external front as Pakistan’s trade deficit shrank by 18 percent YoY and 47 percent MoM during the month of July 22 mainly on the back of decline in import bill.

Analysts expect that the current account deficit will be lower in FY23 due to measures taken by the authorities to curb imports along with decline in international commodity prices. Current account deficit estimated below $9 billion in this fiscal year. “We think that policy rate will remain unchanged in upcoming monetary policy and are now near its peak where we can see a decline in policy rates in the second half of FY23”, analysts at Topline said. They said that since the last monetary policy announcement, expectation of improvement in the external account has increased as Pakistan signed a staff level agreement with the IMF and IMF’s board is likely to approve a tranche of $1.2 billion on August 29, 2022.

In addition, Pak Rupee against the US dollar has also started strengthening after making a low of Rs240 and now it has strengthened to Rs214.65 against USD in the inter-bank market. These positive news flows have increased prospects of status quo in upcoming monetary policy, they added.