Tight monetary policy to support 'sustainable' growth likely to continue

As Pakistan continues to face challenges with oil prices and inflation, financial experts predict the State Bank of Pakistan (SBP) will maintain a tight monetary policy to support sustainable growth. September's Consumer Price Index showed a staggering 10.3% inflation rate, making it clear that industries, businesses, and the general public will feel the impact of cost-push inflation.

The SBP is not expected to lower interest rates to boost economic activity, as experts believe this would only worsen the current economic situation. Instead, the central bank will focus on sustaining growth at a modest 3-3.7% rate, which has been deemed insufficient for job creation and poverty alleviation in the country. Experts also point out that inflated energy prices and overall double-digit inflation are preventing domestic and foreign investment, while existing industries struggle to survive.

The situation would only improve with a comprehensive economic policy aimed at stimulating domestic investment, which is being hindered by elevated energy costs and inflation. The government has recently raised cut-off yields for government bonds, suggesting a potential increase in the SBP's policy rate at the upcoming Monetary Policy Committee meeting on October 26.