Monetary policy may ease: SBP

[Naveed Yaseen]

KARACHI (April 08 2009): The monetary policy will aim to balance growth and inflation concerns, the countrys top economic adviser and the State Bank of Pakistan governor said in a letter posted on the International Monetary Funds website. The letter of intent, dated March 16 and posted late on Monday, was written before the IMF approved the second tranche of its emergency loan.

"The SBP will calibrate monetary policy to balance concerns about the slowdown in economic activity, subject to the overall objective of lowering inflation," the letter said. "Provided that the expected decline in inflation materialises and market confidence remains positive, there could be scope for a more accommodative monetary policy stance."

The central bank kept its rates unchanged in January and is due to review them again this month. Most analysts are expecting an interest rate cut given that inflation data due in the next few days is expected to show a marked fall in March.

The letter, signed by Shaukat Tarin, adviser to the prime minister and SBP governor Salim Raza, also said that the disbursement of multilateral programme financing has been slow and projected privatisation receipts for the fiscal year 2008/09 budget were unlikely to materialise. It said the upcoming donor meeting in Tokyo on April 17 was "pivotal" for mobilising additional financing.

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