Pakistan Central Bank Holds Rate in New Governor's First Meeting

  • Bajwa appointed governor after currency “miscommunication”
  • Inflation rate in June rose 3.9%, lower than estimated

A vendor rides a bicycle past the State Bank of Pakistan building.

Photographer: Asim Hafeez/Bloomberg

Pakistan’s central bank left its interest rate unchanged in the first meeting headed by Governor Tariq Bajwa who was appointed this month after “miscommunication” led to the nation’s biggest currency plunge in nine years.

The State Bank of Pakistan kept target policy rate at 5.75 percent, Bajwa said on Saturday at a briefing in Karachi. The decision was predicted by all 20 economists in a Bloomberg survey. The central bank has not changed the rate since May last year, the longest streak in more than a decade, according to data compiled by Bloomberg.

The government appointed former tax agency chief Bajwa days after the rupee plunged 3 percent on July 5, a decline Finance Minister Ishaq Dar put down to “miscommunication.” The rupee has since recouped most of the loss.

The currency wobble was another blow for the administration of Prime Minister Nawaz Sharif, who along with his three children, face allegations of corruption after a probe delved into the family’s finances and London property purchases. The Supreme Court on Friday concluded its hearing into the investigative probe and said it would give an order over the case at an unspecified later date.

Consumer prices rose 3.9 percent in June, lower than 4.45 percent estimate by economists surveyed by Bloomberg. The nation’s current account gap more than doubled to $12.1 billion in year ended June compared with $4.9 billion year earlier. The rupee has weakened 0.9 percent against the dollar this year.

“Economic growth is across all sectors,” Bajwa told reporters in Karachi. Though “the current account is a challenge” along with the exchange rate, which the central bank is “working to meet,” he said.

Inflation “still remains subdued” and external pressures are manageable, Shahbaz Ashraf, research head at Arif Habib Ltd. said by phone before the decision. “The central bank may go for a hike after November when inflation is expected to see an up tick.”

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