Monetary Policy Of Pakistan

Taimoor Altaf MemonKeenjhar KhosoNeha Khan

Defination

The process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.

In Pakistan, State Bank of Pakistan is the executor of the policy.

Objectives

Attain Full Employment or Reduce Unemployment

Controls Inflation and Achieve Price StabilityPromote Economic Growth Increase Trade Cycle ( Imports and Exports)Regulates Money Supply in the Economy.

Instruments

Interest Rate:- The rate which is charged or paid for the use of money.

Statutory Liquidity Ratio:- The amount that the commercial banks require to maintain with the State Bank and the bank pays interest on it.

Cash Reserve Ratio:-Specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank

Monetary Policy-March 2014 Real

SectorGrowth : Cumulative

growth of 6.8 percent was recorded in the LSM sector during Jul-Dec FY14, compared to a growth of 2.3 percent

during the same period of last year.

Production targets of all major crops for FY14 are higher than the actual production in FY13.

GDP GrowthProvisional estimates show real GDP growth of 3.6 percent during FY13, which is lower than the target (4.3 percent) for the year and revised estimate (4.4 percent) for FY14.

However, Agriculture growth expected at 3.8%, Industry at 4.8% and Services at 4.6% for FY14.

Savings and InvestmentSaving investment gap has narrowed in FY13,

compared to FY12.

Gross fixed investment in the Manufacturing sector

as percent of GDP has shown a declining trend.

Inflation

Headline CPI inflation (Year on year bais)

remained at 7.9 percent during February 2014 and

January 2014.

CPI food inflation has increased to 7.6 percent

in February 2014 from 7.2 percent in the previous

month

Balance of Payments

External current account balance witnessed a

deficit of US$2.0 billion during Jul-Jan FY14, compared to US$0.4

billion during the same period last year.

Workers' remittances registered a growth of

10.1 percent during Jul-Jan FY14.

Trade Balance and

FDITrade deficit has increased

to US$ 9.8 billion during Jul-Jan FY14, compared to US$ 9.3 billion in Jul-Jan

FY13.

Net FDI inflows remained almost same during Jul-Jan FY14, compared to same period last year.

Revenues, Expenditures

and Fiscal Balances

Fiscal deficit was recorded at 2.1 percent of GDP

during H1-FY14, compared to 2.7 percent in the same

period last year. During FY14, fiscal deficit

was entirely financed through borrowings from

domestic sources.

Revenue and Expenditures

Total DebtStock of total debt and liabilities increased by Rs1,023 billion during

FY14, so far. Stock of public sector

external debt has decreased by US$ 0.4

billion during H1-FY14. Stock of external debt as

percent of GDP has declined to 25.9 percent by the end of June 2013.

Total Debt Amount

Foreign Exchange

Market and KSE

Pak rupee has appreciated by 0.24 percent against

US Dollar in FY14, so far. In real terms, Pak rupee has depreciated by 2.2 percent during Jul-Jan

FY14. Since end June 2013, KSE-

100 index and market capitalization has

increased by 28.9 percent and 50.2 percent

Thank You