Excerpt from the statement by the Central Board of Directors of SBP:
Fundamental issues responsible for sluggish long-term economic growth in Pakistan, such as weak economic management and low productivity, have largely remained unaddressed. An unprecedented global economic crisis together with escalating energy shortages and worsening security conditions in the domestic economy in recent years has not helped the situation either.
Despite pressures and speculations of a drop in the value of the Pak rupee the foreign exchange market has largely remained stable in FY13. However, since the beginning of FY14 the rupee has depreciated by 5.0 percent as of 12th September 2013. Speculative sentiments in the market prior to the new IMF program were a major reason for this accelerated depreciation. The role of volatile conditions in global financial markets, post the announcement of tapering-off of Quantitative Easing (QE) by the Federal Reserve of USA in May 2013, cannot be ruled out either.
The inflation has been on a declining trend since December 2010. As a result, the average CPI inflation in FY13 came down to 7.4 percent – a little more than 2 percentage points lower than the target for the year – after remaining in double digits for five consecutive years. Importantly, this decline has mostly been broad based.
The Central Board of Directors of SBP has decided to increase the SBP policy rate by 50 basis points to 9.5 percent with effect from 16th September 2013.