Economy – Monetary Policy Announcement – March 2023

Research Team

Table of Contents

Economy – Monetary Policy Announcement

MPC Briefing Notes

State Bank of Pakistan held the Monetary Policy Committee (MPC) meeting today, wherein the MPC increased the policy rate by 300bps to 20%.

Key Highlights

● The MPC noted that the recent fiscal adjustments and exchange rate depreciation have led to a significant deterioration in the near-term inflation outlook and a further upward drift in inflation expectations, as reflected in the latest wave of surveys.
● The SBP has revised its headline inflation target to 27-29% for FY23 compared to its Nov’22 projection of 21-23% – warranting strong policy response.
● Furthermore, the MPS also highlighted that despite a significant reduction in the current account deficit, the scheduled debt repayments, declining financial inflows, and low FX reserves, still prevail the uncertainty.
● As per the SBP, the total repayment of external financing stood around USD4.3bn for next 4MFY23. Whereas, USD1.3bn is expected to be rollover, thus net repayment of external financing for remaining 4MFY23 is amounted to USD2.9bn, respectively.
● The MPC also emphasized the need for urgent energy conservation measures and the conclusion of the ongoing IMF review to address external sector challenges.
● The Committee also decided to hold its next MPC meeting on 4th April, 2023, two weeks earlier before scheduled on 27th April 2023, due to Eid holidays and reviewing the measures that are being taken by the government.
● Going-Forward, the MPC noted that today’s decision has pushed the real interest rate in positive territory on a forward-looking basis, until and unless the unexpected future shocks happen. This will help anchor inflation expectations and steer inflation to the medium-term target of 5-7% by the end of FY25.

Important Disclosures


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