Pakistan’s central bank rules out 'sudden and higher' interest rate changes in foreseeable future

This undated file photo shows premises of the State Bank of Pakistan. (Shutterstock)
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Updated 22 January 2021

Pakistan’s central bank rules out 'sudden and higher' interest rate changes in foreseeable future

  • The State Bank of Pakistan has given forward guidance on monetary policy for the first time to address concerns of investors
  • The central bank maintains policy rate at 7 percent for the next two months as domestic recovery gains traction

KARACHI: Pakistan’s central bank on Friday ruled out any “sudden and higher” interest rate movements in the foreseeable future amid speculations that the International Monetary Fund (IMF) was likely to resume its $6 billion loan program for the country. 

The bank decided to maintain the policy rate at 7 percent for the next two months, saying that domestic economic recovery had gained further traction. 

“In the absence of unforeseen developments, the Monetary Policy Committee (MPC) expects monetary policy settings to remain unchanged in the near term,” Governor State Bank of Pakistan (SBP) Dr Reza Baqir told a news conference in Karachi. 

“As the recovery becomes more durable and the economy returns to full capacity, the MPC expects any adjustments in the policy rate to be ‘measured and gradual’ to achieve mildly positive real interest rates,” he said while reading a document, adding that the MPC considered it appropriate to provide some forward guidance on monetary policy to facilitate policy predictability and decision-making by economic agents. 

Last week, Baqir said the country was hoping for good news following talks with the IMF on the revival of fiscal stabilization program where concerns about future interest rates were also raised. The central bank’s forward guidance is meant to assuage such concerns of investors and business community. 

Pakistan signed $6 billion, three-year Extended Fund Facility (EFF) with the IMF and has so far secured $1.44 billion under the loan program since July 2019. The country was expecting another tranche of about $450 million before the second review was put on hold about a year ago. 

“We were in touch with the IMF at the technical level and the IMF also wanted fast economic recovery,” the SBP governor said, adding: “Now talks are going on with the IMF and when announcement would be made that our agreement on the review has been done its basic purpose would be to maintain the economic growth so that recovery could be stabilized.” 

Despite recent electricity tariff hikes, the central bank said that inflation was expected to fall within the previously announced range of 7-9 percent during FY21, hoping that the trend would move toward the 5-7 percent target range over the medium-term. 

Pakistan on Thursday increased the electricity tariff by Rs1.95 per unit, or 15 percent, which will also affect the base tariff for lifeline consumers using up to 50 units per month for the first time in almost two decades.

The SBP governor said, however, that the impact of these measures on inflation would be temporary. 

“The rates have been increased in the past as well,” he added, “but we witnessed that their impact was temporary.” 

He said the country had come out of the difficult stabilization phase and the economic activity data and indicators of consumer and business sentiment were reflecting continued improvement. 

However, the MPC stressed in its report that considerable uncertainty remained part of the general economic outlook. 

“The trajectory of the COVID pandemic is difficult to predict, given still-elevated global cases, the emergence of new strains, and lingering uncertainties about the roll out of vaccines worldwide,” the SBP statement read. “Such external shocks could slow the recovery.” 


Pakistan keeps petrol prices unchanged despite global rate hike

Updated 28 February 2021

Pakistan keeps petrol prices unchanged despite global rate hike

  • Oil regulatory body recommended prices of petroleum products be increased to between Rs6 and Rs7 per liter
  • Suggestion rejected by Prime Minister Imran Khan

ISLAMABAD: Pakistan’s Prime Minister Imran Khan on Sunday turned down a proposal by the country’s Oil and Gas Regulatory Authority (OGRA) to increase prices of petroleum products, Special Assistant to Prime Minister on Political Communication Shahbaz Gill said in a tweet.
According to a document, also shared by Gill on his Twitter, the OGRA had recommended that the prices of petrol, high speed diesel, kerosene and light diesel be increased by various amounts between Rs6 and Rs7 per liter.
“...Prime Minister Imran Khan did not accept this proposal. There has been no increase in the prices of petroleum products. Despite the continuous rise in the prices of petroleum products in the world market, the prime minister did not allow it,” Gill tweeted.
The new prices would have been effective from March 1. Prices are generally revised every 15 days.
Earlier this month too, the regulatory authority had proposed an increase in petroleum prices but Khan turned the suggestion down. This was a break from continuous price hikes for the last five consecutive fortnights and came despite an increase in global oil prices over the last two weeks.


Malala dreams of a 'true friendship' between Pakistan and India

Updated 28 February 2021

Malala dreams of a 'true friendship' between Pakistan and India

  • Malala was speaking on the last day of during the Jaipur Literature Festival
  • For the first time in six years, the event welcomed Pakistani participants

ISLAMABAD: Nobel Prize winning activist Malala Yousafzai on Sunday said her dream was to see India and Pakistan become "true, good friends."
Ties between Pakistan and India have been shaped by a bitter rivalry and armed conflict since the partition of British-ruled India into Muslim Pakistan and majority Hindu India in 1947.
Malala was speaking during a session on her latest book, "We are Displaced: My Journey and Stories from Refugee Girls Around the World," on the last day of the Jaipur Literature Festival (JLF), which was held online this year due to the coronavirus outbreak. 

Malala Yousafzai speaks to editor and writer Pragya Tiwari during a Jaipur Literature Festival (JIF) on Sunday, February 28, 2021. (Photo courtesy: JIF)

For the first time in six years, the literary event known as the "greatest literary show on Earth" welcomed Pakistani participants, who for its earlier editions faced difficulties in obtaining Indian visas.
"It is my dream to see India and Pakistan become true good friends," Malala said in a session moderated by New Delhi-based editor and writer Pragya Tiwari.
"You are Indian and I am Pakistani and we are completely fine, then why is this hatred created between us?"
"This old philosophy of borders, divisions and divide and conquer ... they just don’t work anymore," she said. "As humans, we all want to live in peace."
The 14th edition of the Indian literary event that normally attracts hundreds of thousands of visitors to its venue in the 19th-century Diggi Palace Hotel in Jaipur, had among its speakers Douglas Stuart, the winner the 2020 Booker Prize, and prominent American social scientist and linguist Noam Chomsky.
From Pakistan, besides Malala, the JLF sessions also welcomed novelists Moni Mohsin, H.M. Naqvi, and political scientist Ishtiaq Ahmed.


UAE hails Pakistan-India border truce in Kashmir

Updated 28 February 2021

UAE hails Pakistan-India border truce in Kashmir

  • Ceasefire on Kashmir border was settled by the Indian and Pakistani militaries last week
  • UAE urges dialogue between the two South Asian nations to 'establish a lasting peace'

ISLAMABAD: The United Arab Emirates (UAE) on Sunday welcomed an agreement between the militaries of Pakistan and India to restore ceasefire along their disputed border in Kashmir.

Kashmir has long been a flashpoint between Pakistan and India as both claim the region in full but rule in part. Tensions increased in August 2019, after New Delhi withdrew the region's autonomy and split it into federally administered territories. In recent months, cross-border firing has become frequent, often killing or maiming people living in the area.

On Thursday, however, the military operations heads of nuclear-armed neighbors said in a joint statement that they had agreed to discuss each other's concerns that could disturb peace and lead to violence along the Line of Control (LoC). The announcement has been seen as restoring a ceasefire agreement from 2003.

"UAE has close historical ties with the Republic of India and the Islamic Republic of Pakistan and that it commends the efforts of the two countries to reach this achievement," the UAE Ministry of Foreign Affairs and International Cooperation said in a statement on Sunday.

"This is an important step towards achieving security, stability and prosperity in the region," it said, adding that "adhering to a permanent ceasefire between the two friendly countries in Kashmir to the benefit of both sides."

The UAE also urged dialogue between the two South Asian countries to "build bridges of confidence and establish a lasting peace."

On Saturday, Pakistani Prime Minister Imran Khan said in series of tweets that Islamabad was ready to resolve all issues with New Delhi through dialogue.

“We have always stood for peace & remain ready to move forward to resolve all outstanding issues through dialogue,” Khan said, as he also the restoration of ceasefire along the LOC.


Kabul welcomes Pakistan's rejection of a future Taliban government — Afghan envoy

Updated 28 February 2021

Kabul welcomes Pakistan's rejection of a future Taliban government — Afghan envoy

  • Pakistan Army spokesperson told reporters last week that ‘Taliban control of Kabul again is not possible’
  • Afghan president’s special envoy says Pakistani leaders promised to openly call for a cease-fire in Afghanistan

ISLAMABAD: Afghanistan’s special envoy has welcomed the Pakistani military’s announcement that it would oppose the return of the Taliban to power in Afghanistan.
The Afghan president’s special envoy for Pakistan, Mohammad Umer Daudzai, was on a three-day visit to Islamabad last week as peace talks between the Taliban and the Afghan government have resumed in Qatar to yield a power-sharing arrangement in the country torn by a decades-long conflict.

Afghan president's special envoy for Pakistan, Mohammad Umer Daudzai (first in the left row) meets Pakistan's Foreign Minister, Shah Mahmood Qureshi (center) in Islamabad, Pakistan, on February 26, 2021. (Photo courtesy: Mohammad Umer Daudzai/Twitter)

During the peace talks, which started in September and have been suspended several times since, Afghan government negotiators have been pushing for a permanent cease-fire and are expected to protect the existing system of governance — in place since the ouster of the Taliban by a US-led invasion of Afghanistan in 2001.
As Daudzai was visiting Islamabad, which has been seen as critical to getting the Taliban back to the negotiating table and pushing them to reduce violence in Afghanistan, Pakistan Army spokesperson Maj. Gen. Babar Iftikhar told reporters on Wednesday that “Taliban control of Kabul again is not possible, and Pakistan will not support any such move.”
Daudzai welcomed the statement as a “very positive development” and one that is not accidental.
“The statement by the Pakistan’s army spokesman is new, which is not by chance. Armies take assessment of the environment in their neighborhood and the Pakistan army has realized that Afghan army, police and the system are strong, and the Taliban cannot topple the system,” he told Arab News in an interview on Friday.
He said that during his trip that wrapped on Friday, Pakistani leaders had told him they would openly call for a cease-fire in Afghanistan instead of the “ambiguous and useless words ‘reduction in violence’” that had been used by international representatives in official talks.
Daudzai told Arab News that ahead of December’s visit of Taliban delegates to Islamabad, Pakistani Prime Minister Imran Khan had assured Afghan President Ashraf Ghani that he would take up the cease-fire issue with the group.
“But later we realized that the Taliban did not show flexibility on the issue,” Daudzai said.
The Taliban have been rejecting cease-fire since the beginning of intra-Afghan negotiations.
“If Pakistan says that it does not have control over the Taliban but has some influence, we request Pakistan to take advantage of its influence and convince the Taliban to hold fruitful negotiations,” the Afghan envoy said, as he expressed hope for progress before Ghani’s planned visit before the beginning of the fasting month of Ramadan in mid-April.
“We want major progress before the president’s visit to Pakistan so both sides make any important announcement,” he said.


Gunmen kill Islamic cleric, his son, student near Islamabad

Updated 28 February 2021

Gunmen kill Islamic cleric, his son, student near Islamabad

  • No group claimed responsibility for the killing that place in Bhara Kahu neighborhood on Saturday night
  • Cleric was affiliated with Maulana Fazlur Rehman who heads an 11-party opposition alliance to topple the government

ISLAMABAD: A trio of gunmen shot and killed a religious cleric, his teenage son and a student on the outskirts of Pakistan’s capital Islamabad, police said, amid a rise in militant attacks.
Police officer Shahzad Khan said the killing took place in the Bhara Kahu neighborhood when Mufti Ikramur Rehman was heading toward his car with his 13-year-old son and a seminary student late Saturday night.
He said three assailants fired several shots before fleeing the scene. The cleric, his son and the student received multiple gunshot wounds and died at a hospital.
No one immediately claimed responsibility for the attack and Khan said an investigation was underway to ascertain the identity of the assailants and the motive behind the killings.
Ikramur Rehman was affiliated with the party of firebrand cleric Maulana Fazlur Rehman, who heads an 11-party opposition alliance to topple the government.
Militant violence in Pakistan is on the rise. Last week, four vocational school instructors who advocated for women’s rights were traveling together when they were gunned down in a Pakistan border region. A Twitter death threat against Nobel laureate Malala Yousafzai attracted an avalanche of trolls who heaped abuse on the young champion of girls education. A couple of men on a motorcycle opened fire on a police check-post not far from the Afghan border killing a young police constable.
In recent weeks, at least a dozen military and paramilitary men have been killed in ambushes, attacks and operations against militant hideouts, mostly in the western border regions.