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Pakistan holds interest rates as inflation steadies

Reuters/Karachi
Filed on November 23, 2019 | Last updated on November 23, 2019 at 07.20 am
Pakistan's market sentiment has begun to gradually improve on the back of sustained improvements in the current account and continued fiscal prudence.

(AFP file)

Central bank expects inflation to ease in second half of fiscal year to end of next June

Pakistan's central bank kept its main interest rate at 13.25 per cent on Friday, having recently stopped hiking rates as data on the economy has begun to show that inflation is steadying.

The bank said it expected inflation to ease in the second half of the fiscal year to the end of next June and remain broadly unchanged in fiscal 2020 at 11 per cent to 12 per cent.

Furthermore, the current account balance, the broadest measure of the country's trade with the rest of the world, turned to a surplus in October for the first time in four years, the bank said, meaning external pressure on Pakistan's finances is receding.

"The market sentiment has begun to gradually improve on the back of sustained improvements in the current account and continued fiscal prudence," the statement said.

"In the first four months of the current fiscal year, the current account deficit contracted by 73.5 per cent to $1.5 billion," it added.

It said the government's primary balance - the balance of revenue versus spending excluding debt-servicing costs - is likely to enter a surplus in the first quarter of next fiscal year for the first time in almost four years. "This, together with the end-of-deficit monetisation, has qualitatively improved the inflation outlook."

The bank last lifted rates in July.


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