Pakistan Economy - 300bps hike, All steps to get IMF on board, (AKD Daily, Mar 03, 2023)
AKD Daily
Pakistan Economy - 300bps hike, All steps to get IMF on board
- In an aggressive move likely on account of IMF conditionalities, the SBP moved the country’s policy rate to 20% - a hike of 300bps compared to consensus estimate of 200bps.
- Fiscal measures being undertaken (increase in GST / tariffs, reduction in subsidies etc.) will result in further inflationary pressures in the near to medium term where the SBP itself expects inflation to rise in the next few months.
- Being quite behind the curve, the SBP now expects average inflation for FY23 to clock in at 27-29% compared to its previous projection of 21-23%.
- Prior to the rate hike, the day had already witnessed significant volatility in the exchange rate with the PkR/US$ parity settling at 285.
- The SBP has also brought forward the next MPS to April 4’23, where a further hike cannot be ruled out.
- For things to stabilize, the buck stops at IMF. Get into an IMF program and maybe some semblance of stability may appear, at least on the external front. Any further delays, and expect things to worsen.
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