KARACHI - Pakistan and the International Monetary Fund (IMF) are constantly in ‘technical discussions’ to resume a $6 billion loan programme and the Fund has supported Pakistan during the COVID-19 pandemic, Dr Reza Baqir, governor State Bank of Pakistan said on Monday as he announced the central bank’s decision to keep the policy rate unchanged at seven percent. 

The central bank in June slashed rates by 100 basis points to seven percent to help counter the fallout of the coronavirus pandemic on economic activity. “We are constantly engaged with the IMF on technical discussions,” Baqir told media after the announcement of the monetary policy, according to Arab News. “We are watching the outlook, apparently not all things are agreed on and some things need more discussions … In this, the overall point is how quickly the economy recovers.”

Last year, the International Monetary Fund approved a three-year, $6 billion loan package for Pakistan to rein in mounting debts and stave off a looming balance of payments crisis, in exchange for tough austerity measures. Pakistan has so far secured $1.44 billion under the loan program, which has been put hold.  

Reading out from a statement, the central bank governor said the bank had decided to keep the policy rate unchanged at seven percent for the next two months.  

“The MPC [monetary policy committee] noted that compared to the time of the last meeting in June 2020, business confidence and the outlook for growth have improved. This reflects the decline in Covid-19 cases in Pakistan and the easing of lockdowns, as well as the timely stimulus provided by the Government and SBP,” Baqir said. 

“At the same time, the forecast for inflation has risen slightly, primarily due to recent supply side shocks to food prices. Average inflation is now expected to fall within the previously announced range of 7– 9 percent during FY21, rather than marginally below,” he added.

“Financial conditions continue to be accommodative with real interest rates remaining slightly below zero on a forward-looking basis,” the governor said, adding that a series of targeted measures undertaken by the central bank since the Covid-19 outbreak had injected significant liquidity and further lowered funding costs for many businesses and households. Together, these monetary measures have injected an estimated stimulus of Rs 1.58 trillion, or about 3.8 percent of GDP, in the cash flow of businesses and households, Baqir added. The State Bank of Pakistan (SBP) Monday decided to keep the policy rate unchanged at 7 percent.

In a tweet, SBP said, the Monetary Policy Committee of the bank met Monday under the chairmanship of Governor SBP, Dr. Reza Baqir and decided to keep the policy rate unchanged at 7 percent.