Monetary Policy Of Pakistan

Taimoor Altaf Memon

Keenjhar Khoso
Neha 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 Stability
Promote 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
Sector
Growth : 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 Growth
Provisional 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
Investment
Saving 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 FDI
Trade 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 Debt
Stock 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