SBP keeps policy rate unchanged, sees inflation below target

KARACHI: State Bank of Pakistan (SBP) maintained the country's main policy interest rate at 5.75 percent on Saturday, the bank's governor said, citing overall macroeconomic stability and a steady inflation outlook.

Governor Ashraf Mahmood Wathra said average inflation was 3.9 percent in the first half of the fiscal year that runs from July 2016 to June 2017.

"The current trend suggest that actual inflation will be lower than the target rate of 6 percent in FY 2017," he said.

Wathra added that economic growth was picking up momentum due to "visible improvement in energy supply and upbeat business sentiment."

Pakistan's crippling energy blackouts have been roughly cut in half over the past few months, and government officials expect outages that last several hours every day to be eradicated over the next 18 months.

Pakistan's economy has rebounded in recent years, helped by improved security, and growth is expected at just over 5 percent this fiscal year, the highest since 2008.

Wathra said private sector borrowing had increased and "demand for consumer financing especially for auto loans gathered pace during the first half of year."

The country's current account deficit, however, has ballooned to $3.6 billion over those six months, compared with $1.7 billion in the same period the previous year.

Wathra said the deficit had grown due to declining exports, dwindling remittances, and an increase in imports related to Beijing's $57 billion investment in rail, road and energy infrastructure for the China-Pakistan Economic Corridor (CPEC).