Islamabad, JULY29: A new budget and a staff-level agreement with international lender the IMF preceded Pakistan’s central bank’s first policy meeting to determine a crucial interest rate, and on Monday, the country’s benchmark share index increased by 1%.
In order to spur growth in the face of a dramatic decrease in retail inflation, analysts anticipate that the State Bank of Pakistan (SBP) would make additional cuts following its June reduction of 150 basis points from an all-time high of 22%. This was the first cut in over four years.
The market’s movement on Monday was ascribed by Adnan Sheikh, assistant vice president of research at Pak Kuwait Investment Company, to “positive news flow over the weekend from China, along with expectations of rate cut.”
The finance minister announced at a press conference on Sunday that Pakistan has started discussions on refinancing its power sector debt to China in addition to discussions on structural transformation recommended by the International Monetary Fund (IMF).
As for the Chinese debt initiative, the minister said that each project will be addressed separately and that Islamabad would like to provide a local adviser to China.
The deeply indebted South Asian economy received a $7 billion rescue this month from the IMF, but worries were voiced about the high rates of electricity theft and distribution losses that lead to debt accumulation throughout the industrial chain.
