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SBP keeps policy interest rate unchanged

KARACHI -UNS : The State Bank of Pakistan (SBP) has kept main policy interest rate unchanged at 5.75 percent. Following is SBP statement over the policy interest rate:

Macroeconomic environment remains conducive to growth without impacting headline inflation.

Favorable initial estimates of major crops, a healthy growth in credit to private sector and growing productive imports all indicate solid gains in the real sector. On the back of adequate food supplies and stable international commodity prices, headline inflation decelerated in the first two months of FY18.

The pursuit of higher economic growth however poses growing challenges partly enunciated at the start of FY18. These include those arising from pressures on the external front and an expansionary fiscal policy.

Expounding the real sector, full year LSM data indicates a healthy and broad-based growth of 5.7 percent for FY17 as compared to its earlier estimates of 4.9 percent. In fact, LSM for July 2017 posted a growth of 13.0 percent.

Delving deeper into FY18, manufacturing activity is expected to benefit from higher development spending, growing investments in CPEC-related projects, improvement in security condition, and the continued trend of stable and low cost of borrowing.

Furthermore, an upbeat industrial outlook and a promising assessment of major crops are going to have positive spillovers on the services sector.

Based on current projections of agriculture sector growth, GDP growth is likely to reach the annual target of 6.0 percent for FY18 leading to an improved capacity to accommodate rising domestic demand.

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